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					                                               PEOPLE’S FOOD
                               for    People




                                                      Annual Report
PEOPLE’S FOOD HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
                                                      2002
      CONTENT
 2   Corporate Information
 4   Five-Year Financial Highlights
 6   Chairman’s Statement
11   Management Discussion and Analysis
20   Production Base and Networks
22   Directors and Senior Management Profiles
25   Report of the Directors
34   Statement by Directors
35   Statement on Corporate Governance
41   Report of the Auditors
     Audited Financial Statements
       Group and Company:
42       Profit and Loss Accounts
43       Statements of Recognised
           Gains and Losses
44       Balance Sheets
       Group:
45       Consolidated Cash Flow Statement
47   Notes to Financial Statements
75   Statistics of Shareholdings
77   Notice of Annual General Meeting
Corporate Profile

Founded in 1994, People’s Food           Linyi, Tongliao, Xiangtan, Meishan,
Holdings Limited has established a       Daqing, Shangqiu and Xinglong in
strong market presence and is one        the PRC, the last two plants being
of the leading providers of meat         recently leased in January 2003. The
products in China. The Group is          Group’s plant in Linyi was awarded
principally engaged in the production    the Hazard Analysis Critical Control
and distribution of meat products in     Point (HACCP) certification for food
the PRC under the brand name             safety in May 2002.
“Jinluo”, through its dealership
distribution network, its sales teams,   People’s Food Holdings Limited was
sales outlets and specialty stores.      listed on the Mainboard of the
                                         Singapore Exchange Securities
The Group’s mission is to establish      Trading Limited in March 2001 and
the company’s Jinluo brand into a        on the Mainboard of the Stock
recognised household name that is        Exchange of Hong Kong Limited in
renowned for high quality, tasty,        October 2002.
nutritious and value-for-money meat
products. In September 2002, the
Group’s “Jinluo” brand was officially
recognised as a “China Top Brand”
for its High Temperature Meat
Products      by    the    General
Administration        of    Quality
Supervision,      Inspection    and
Quarantine of the PRC.

People’s Food Holdings     Limited is
headquartered in Linyi,    Shandong
Province and operates      a total of
seven production plants    located in
Corporate Information
BOARD OF DIRECTORS                       As to Bermuda law:
Executive:                               Conyers Dill & Pearman
Ming Kam Sing, Chairman                  2901 One Exchange Square
Zhou Lian Kui, Chief Executive Officer   8 Connaught Place
Zhou Lian Liang                          Central
                                         Hong Kong
Independent and non-executive:
Chan Kin Sang                            AUDITORS
Chng Hee Kok                             Ernst & Young
Ow Chin Hock                             Certified Public Accountants
                                         15th Floor Hutchison House
COMPANY SECRETARIES                      10 Harcourt Road Central
Pang Wai Hong                            Hong Kong
Yvonne Choo
                                         PARTNER-IN-CHARGE
ASSISTANT COMPANY SECRETARY              Andrew Lam (Commencing the financial year
Ira Stuart Outerbridge III                 ended 31 December 2002)


LEGAL ADVISERS TO THE COMPANY            AUTHORISED REPRESENTATIVES
As to Hong Kong law:                     Ming Kam Sing
Kwok & Yih                               Zhou Lian Liang
37th Floor, Gloucester Tower
The Landmark                             AUDIT COMMITTEE
Central                                  Chng Hee Kok, Chairman
Hong Kong                                Chan Kin Sang
                                         Ow Chin Hock
                                                          Corporate Information 03




NOMINATING COMMITTEE                   HONG KONG BRANCH SHARE REGISTRAR
(established on 20 March 2002)           AND TRANSFER OFFICE
Ow Chin Hock, Chairman                 Tengis Limited
Chng Hee Kok                           Ground Floor
Chan Kin Sang                          Bank of East Asia Harbour View Centre
Ming Kam Sing                          56 Gloucester Road
                                       Wanchai
REMUNERATION COMMITTEE                 Hong Kong
(established on 20 March 2002)
Chan Kin Sang, Chairman
                                       SINGAPORE SHARE TRANSFER AGENT
Chng Hee Kok
                                       Lim Assoicates (Pte) Ltd
Ow Chin Hock
                                       10 Collyer Quay
Ming Kam Sing
                                       #19-08 Ocean Building
                                       Singapore 049315
REGISTERED OFFICE
Clarendon House
                                       PRINCIPAL BANKERS
2 Church Street
                                       In The People’s Republic of China:
Hamilton HM 11
                                       Agricultural Bank of China, Linyi Branch
Bermuda
                                       Bank of China, Linyi Branch
PRINCIPAL OFFICES
Bancheng Town Linyi Shandong           In Hong Kong:
Postal Code 276036                     Bank of China (Hong Kong) Limited
People’s Republic of China
                                       WEBSITE ADDRESS
1608—10 Concordia Plaza                http://www.peoplesfood.com.sg
1 Science Museum Road                  http://www.jinluo.com.cn
Tsimshatsui East
Kowloon                                STOCK CODE
Hong Kong                              The Stock Exchange of Hong Kong Limited: 708
                                       The Singapore Exchange Securities
PRINCIPAL SHARE REGISTRAR IN BERMUDA     Trading Limited: P05
The Bank of Bermuda Limited
Bank of Bermuda Building
6 Front Street
Hamilton HM 11
Bermuda
04 Five-Year Financial Highlights




                                                                              1998         1999           2000            2001            2002


    Financial results and information (RMB’million)
    Sales                                                                    1,631        2,298           3,174          4,237           5,057
    Operating Profit                                                           253          401             549            769             970
    EBITDA                                                                     287          452             602            840           1,056
    Profit Before Tax                                                          220          370             526            754             957
    Profit After Tax                                                           180          303             430            615             823
    Capital Expenditure                                                        121          138              97            260             500
    Short-term Debts                                                           257          258             223            200             200
    Total Assets                                                               827        1,001           1,256          1,890           2,959
    Total Liabilities                                                          483          504             439            357             429
    Net Asset Value                                                            344          497             817          1,533           2,530


    Growth (yoy%)
    Sales                                                                     39.9         40.9            38.1            33.5            19.4
    EBITDA                                                                    54.5          57.1           33.2            39.7            25.7
    Profit Before Tax                                                         57.1         68.0            42.1            43.4            26.9
    Profit After Tax                                                          28.3         68.1            42.1            43.0            33.8
    Net Asset Value                                                           40.9         44.3            64.4            87.5            65.0


    Margins (%)
    Operating Profit                                                          15.5         17.5            17.3            18.1            19.2
    EBITDA                                                                    17.7          19.7           19.0            19.8            20.9
    Profit Before Tax                                                         13.5         16.1            16.6            17.8            18.9


    Per Share (RMB)
    Profit After Tax*                                                         0.19         0.32            0.46            0.60            0.76
    Net Tangible Assets                                                       0.37         0.53            0.88            1.46            2.23
    Dividend                                                                 0.086        0.161           0.118          0.219           0.329


    Financial Ratios
    Return on Assets (%)                                                      34.6          43.7           48.5            48.3            39.5
    Return on Equity (%)                                                      61.1          71.9           65.4            48.3            40.5
    Net Gearing Ratio (%)                                                     53.4         32.4            15.4           cash            cash
    Gearing Ratio (%)                                                         74.6          51.9           27.2            13.0             7.9
    Inventory Turnover (Days)                                                    63           54             49              43              39
    Debtors Turnover (Days)                                                      36           34             31              31              33
    Interest Cover (x)                                                          7.8        12.9            23.5            52.6            73.5

    * The per share data for 1998 to 2000 has been computed on the Group’s pre-invitation share capital of 933,324,723, and weighted average post-
      invitation share capital of 1,029,653,490 for 2001 and 1,088,612,394 for 2002.
06




     Chairman’s Statement
     Dear Shareholders,                                          leased its sixth and seventh plants in Henan Province
                                                                 and Heilongjiang Province respectively which will
     The Financial Year 2002 has been another milestone          further add to our production capacity down the road.
     year for People’s Food Holdings Limited (the
     “Company”) and its subsidiaries (the “Group”). Not only     Over the past few years, we have been able to grow our
     did it mark the second year of our listing on the           business in the People’s Republic of China (“China” or
     Singapore Stock Exchange, but it also marked our            “PRC”) and the Group remains profitable due to our
     listing on the Hong Kong Stock Exchange on 28               sound strategy, our quality products, good geographical
     October 2002. This dual primary listing has not only        coverage as well as the commitment and hard work that
     raised the Group’s profile, but coupled with active         the management and workers have put in to drive the
     coverage of our stock, has resulted in a broader            Group forward. As a result, the Group has reaped the
     shareholders base. The management is also pleased to        rewards and I believe that we will attain greater heights
     note that the listing was well received and the trading     in the years ahead.
     volumes of Singapore counter remains active and
     healthy. The management remains committed to                As part of our ongoing development as a publicly listed
     continue our growth path so as to deliver long-term         company, on 7 January 2003, we appointed Singapore
     value to our shareholders and other stakeholders.           Ambassador-at-large Dr Ow Chin Hock as an
                                                                 independent and non-executive director on our board.
     In FY2002, the Group continued to grow at a rapid           Dr Ow’s appointment is part of our continuing effort to
     pace. Our sales rose 19.4% from RMB4.2 billion to           further enhance the corporate governance of the Group.
     RMB5.1 billion and net profit increased 33.8% from          I would like to take this opportunity to welcome his vast
     RMB614.8 million to RMB822.8 million. As the demand         experience and expertise and look forward to his
     for our products continues to grow, we increased the        contribution.
     number of our manufacturing plants in China to seven
     to date. Simultaneously, we have also upgraded and          FINANCIAL RESULTS
     expanded the existing facilities in our headquarter plant
     in Linyi, Shandong to meet the increasing demand. On        In FY2002, sales rose by 19.4% over the past year to
     23 January 2003, we announced that the Group has            RMB5.1 billion and net profit was RMB822.8 million,
                                                                                                                        07




“by understanding...
 ...our markets
                 ”
 recording a rise of 33.8%. The management is pleased
 with the results achieved this year and remains
                                                              increase the Group’s annual processing capacity to 1.1
                                                              million tonnes by 2004 remains on track.
 optimistic that the Group will continue to grow and
 expand as planned next year.                                 Our financials remain healthy:


 All the product segments performed well. Sales of High       •    Our earnings per share rose 26.6% to RMB0.76 in
 Temperature Meat Product (HTMP) grew from RMB1.32                 2002.
 billion to RMB1.65 billion in FY2002, accounting for
 32.6% of total sales, while sales of Fresh Pork and Low      •    Our Return on Shareholders’ Equity (ROE) was
 Temperature Meat Product (LTMP) in aggregate grew                 high at 40.5% in 2002.
 by 17.1% to RMB486.9 million accounting for a
 combined 9.6% of total sales. Turnover of Frozen Pork        •    Our Return on Assets (ROA) remained strong at
 rose by 20.4% to RMB1.54 billion, while Pig By-                   39.5% in 2002 compared to 48.3% in 2001.
 Products grew by 13.9% to RMB1.24 billion.
                                                              •    Net cash rose to about RMB484.8 million as at
 Overall annual pig processing capacity of the Group               December 2002.
 increased by 160,000 tonnes to 720,000 tonnes as at
 end of December 2002. The average utilization rate of        GROWTH STRATEGY
 the Group stands at about 88.9% on a weighted
 average capacity basis for all five plants in 2002. The      As the pace of the industry consolidation quickens, the
 Daqing plant was operating at about 46% utilization rate     overall growth strategy of the Group is to expand our
 on a weighted average capacity basis as at year end          production capacity and market share. We will continue
 December 2002 and has contributed RMB192 million in          to ramp up our production capacity to serve the
 terms of turnover so far. We are optimistic in ramping       consumer demand for our products in various regions in
 up the plant’s production and have targeted the plant’s      China.
 utilization capacity to increase steadily in the second
 year of operation.                                           We have announced on 23 January 2003 that the sixth
                                                              plant in Henan Province and the seventh plant in
 The fifth plant in Daqing has started to contribute to the   Heilongjiang Province will be leased from Shangqiu
 Group’s turnover for 2002 and with the new sixth and         Fuyuan Food Enterprise Group Limited in Henan
 seventh plants expected to be in operation in 2003, this     Province and the XingLong Forestry Bureau of
 is expected to translate into growth for the Group as a      Heilongjiang Province respectively. The management
 whole in 2003, in terms of turnover and production           will continue to adopt a pragmatic approach in deciding
 contribution from the seven plants. Our target to            whether to obtain productive capacity based on a cost
08 Chairman’s Statement




   and benefit analysis of the feasibility of buying or         date, our Fresh Pork production capacity has expanded
   leasing options. All due diligence conducted on each         from 20,000 tonnes to 100,000 tonnes per annum,
   potential new plant, including a market survey on            whereas our LTMP production capacity rose from
   suppliers of pigs, the plant’s production capacity, state    20,000 tonnes to reach 50,000 tonnes per annum.
   of existing facilities, and the demand for products, will
   be done prior to any negotiations with any leasing or        CERTIFICATIONS AND AWARDS
   selling party. Any investment must satisfy our
   investment criteria of payback period not more than          I am also happy to report that on 1 September 2002,
   three years. As we increase our production capacity by       the Group’s “Jinluo” brand was officially recognised as
   adding new plants, our foremost philosophy is to             one of the top brands in China in 2002 for our HTMP.
   continue to maintain a high level of product quality         The award presentation ceremony was conducted in
   synonymous with our “Jinluo” brand and this will be our      The Great Hall of the People in Beijing and broadcasted
   foremost concern in all our assessments.                     nationwide on the China Central Television Network,
                                                                thereby giving us nationwide awareness. The award
   Over the past year, the Group has been actively              was part of a nationwide survey conducted by the China
   engaged in the marketing and advertising of its              Brands Strategic Promotions Committee under the
   products under its “Jinluo” brand, which the Group           authorization of the General Administration of Quality
   considers as one of its most valuable assets. Our            Supervision, Inspection and Quarantine of the People’s
   brand’s assurance of hygienic and quality products has       Republic of China.
   earned us a loyal group of consumers, and we are
   confident this positioning will help reaching out to new     OUTLOOK
   consumers as well. In addition to the brand awareness
   created, we will also continue to expand our sales force     The outlook for the Group remains positive. The board
   and distribution network to boost our topline. Moreover,     of directors of the Company (the “Board”) is optimistic
   one of the latest developments in terms of distribution is   about the Group’s performance in 2003. According to
   that we are already in the process of introducing our        the Economist Intelligence Unit, China’s GDP will grow
   products into medium-scale supermarkets in those             at an average annual rate of approximately 7.8% for the
   regions where we already have a presence.                    period 2003 to 2006. China’s growth rate translates into
                                                                higher disposable incomes, which will augur well for our
   Due to the urbanization and consequently rising              business. In addition, pork still remains part of the
   purchasing power of the China market, the LTMP and           staple diet in China, accounting for approximately 68%
   fresh pork segments have seen a steady rise in               of total meats consumed. According to the PRC Meat
   demand. We will therefore continue to focus on ramping       Association, total meat consumption in China is
   up production and sales in these product categories. To      forecasted to grow by approximately 12% between
                                                                                Chairman’s Statement 09


“Outlook for the Group
 remains positive...
                    ”
 2000 and 2005. The Board and I believe that with our       greater exposure for the Group in both Singapore and
 sound business strategy, the recognition of the “Jinluo”   Hong Kong as well as internationally.
 brand, and our wide geographical spread of operations,
 the Group will be able to take advantage of China’s        DIVIDEND
 growing domestic economy and rising consumer
 affluence. We will also likely capitalize on the           Therefore, in appreciation of our shareholders, the
 anticipated consolidation of the meat processing           Board had recommended a final dividend of RMB0.190
 industry in the coming years.                              per share. Together with the interim dividend of
                                                            RMB0.139 per Share, the total dividend is RMB0.329
 RELATIONSHIP WITH SHAREHOLDERS                             per share for the year 2002. On a yearly basis, the total
                                                            dividend for FY2002 represents dividend payout of
 We welcomed additional shareholders through our            45%. We have kept to our previous commitment and
 listing by introduction on the Hong Kong Stock             kept our dividend policy at not less than 30% of profit
 Exchange in FY2002. However, our stock has been            after tax.
 affected by the market sentiments towards Chinese
 companies as a whole, as well as the dismal global         APPRECIATION
 economic conditions. Despite this weak overall market
 sentiment, our stock managed to garner strong support.     No company can do well without a good pool of labour,
 In 2003, we will continue our concerted efforts to not     resources and management, especially in such
 only improve on the business front, but also to increase   challenging times. It is therefore appropriate for me to
 shareholders value by further enhancing our corporate      take this opportunity to extend my heart-felt thanks to
 governance and transparency.                               all the people who have once again helped us along or
                                                            contributed to our success in one way or another. I
 The Group is committed to continue to deliver on our       would like to also extend my deepest gratitude to all our
 promises and maintain open communications with the         shareholders for their continued faith and support, as
 investment community. At the same time, we will be         we strive for better years ahead.
 mindful of selective disclosure as we are now subject to
 the stringent regulations of the two exchanges in          Ming Kam Sing
 Singapore and in Hong Kong. In terms of investor           Chairman
 relations, we worked closely with our consultants in
 Hong Kong and Singapore over the past year to reach        18 March 2003
 out to analysts and fund managers. These ongoing
 efforts as well as our strong track record, have led to
                                                                 Turnover by Products (2002)


                                                                                       2.7%
                                                                               24.6%

                                              Frozen Pork                                        30.5%
                                              Fresh Pork
                                              HTMP               4.7%
                                              LTMP
                                              Pig By-Products                                            4.9%
                                              Chicken                                  32.6%




                                               2002                     2001                     %
                                          RMB’000               RMB’000                  Change


Turnover
Frozen Pork                               1,540,286             1,279,575                      20.4
Fresh Pork                                 248,816               216,777                       14.8
High Temperature Meat Products (“HTMP”)   1,649,320             1,319,416                      25.0
Low Temperature Meat Products (“LTMP”)     238,120               199,069                       19.6
Pig’s by products                         1,241,447             1,089,841                      13.9
Chicken                                    138,774               132,202                        5.0

Total                                     5,056,763             4,236,880                      19.4


Profit before tax
Frozen Pork                                265,867               202,777                       31.1
Fresh Pork                                  65,367                 53,355                      22.5
HTMP                                       347,394               271,683                       27.9
LTMP                                        65,769                 53,541                      22.8
Pig’s by products                          193,573               156,712                       23.5
Chicken                                     18,671                 16,050                      16.3

Total                                      956,641               754,118                       26.9
                                                             Management Discussion and Analysis 11



“... Capitalize on the of
 anticipated consolidation
  the meat processing
  industry ...
 REVIEW OF OPERATIONS
                                                     ”                          Turnover by Geographical Region (2002)


 Turnover
                                                                                                               3.8%
                                                                                                    11.8%


 The Group’s turnover increased 19.4% to RMB5.1 billion in                 Linyi
                                                                                            14.0%
                                                                           Tongliao
                                                                                                                      49.5%
 2002, from RMB4.2 billion in 2001. The increase in turnover               Xiangtan
                                                                           Meishan
 was primarily volume driven. Strong branding and the                      Daqing
                                                                                                       20.9%

 continual strong market demand together with the
 commencement of the Group’s Daqing plant in the second half
 of the year contributed to the strong growth. The Group’s
 brand name “Jinluo” was voted as one of the top brands in
 China in 2002 for its HTMP by the China Brands Strategic
 Promotions Committee under the authorization of the General
 Administration of Quality Supervision, Inspection and
 Quarantine of the PRC.


                                                              Overall annual pig processing capacity of the Group rose
                                                              by 160,000 tonnes to 720,000 tonnes as at end of
                            Pig Processing                    December 2002, from 560,000 tonnes as at the end of
                    Capacity by Plant (2002) (tonnes)
                                                              December 2001. The increase in pig processing capacity
                                                              was the result of the acquisition of the fifth plant in Daqing,
                                       80,000
                                                              which was completed in June 2002, and as well as capacity
                             120,000

                                                   290,000
                                                              expansion at the Linyi plant. The weighted average
   Linyi
   Tongliao
                    90,000
                                                              processing capacity had also increased by 27.0% to
   Xiangtan
   Meishan                                                    630,000 tonnes in 2002 from 496,000 tonnes in the
   Daqing                                140,000
                                                              previous year, owing to this capacity expansion. The
                                                              average utilisation rate reached 88.9% in 2002, compared
                                                              with 92.3% last year, largely due to lower utilization at
                                                              Daqing, which started production only in the second half of
                                                              the year.
12 Management Discussion and Analysis




                                      Turnover (1998-2002)                                                                        Profit After Tax
                 (RMB’bn)                                                                                   (RMB’mn)
                                                                                                                                   (1998-2002)
                  6                                                                                          900                                                      430.2
                                                                                       2.95
                                                                                                             800
                  5
                                                                         2.13                                700                                           303.8

                  4                                                                                          600
                                                           1.63
                                                                                                Full Year    500
     Full Year                                                                                                                                  207.6
                  3                                                                             2nd Half                                                              392.6
     2nd Half                                1.15                                                            400
                                                                                                1st Half                             155.7                 311.0
     1st Half                  1.63                                      2.10          2.10
                  2                                                                                          300                                222.4
                                                           1.55
                                                                                                                          180.0
                                             1.15                                                            200                     146.9
                  1
                                                                                                             100
                  0                                                                                            0
                        1998          1999          2000          2001          2002                                   1998       1999       2000       2001       2002
                                                    Year                                                                                     Year




   HTMP                                                                                       continued to benefit from the rising affluence of the
   Sales of HTMP rose 25.0% to RMB1,649.3 million. This                                       Chinese consumers and their changing preference for
   product segment accounted for 32.6% of the Group’s                                         quality and fresh food products.
   total turnover, an increase from 31.1% a year ago. The
   increased sales reflect the firm demand for HTMP as a                                      Frozen Pork, Frozen Chicken and Pig By-Products
   staple food item, particularly in the less developed parts                                 Sales of Frozen Pork and Frozen Chicken respectively
   of the PRC where the penetration of supermarkets is                                        increased by 20.4% and 5.0% to RMB1,540.3 million
   limited.                                                                                   and RMB138.8 million, contributing 30.5% and 2.7% of
                                                                                              the Group’s total turnover. Sales of Pig By-Products
   Fresh Pork and LTMP                                                                        rose 13.9% to RMB1,241.4 million accounting for 24.6%
   Sales of Fresh Pork and LTMP rose by 14.8% and                                             of the Group’s total turnover. Demand for these frozen
   19.6% to RMB248.8 million and RMB238.1 million                                             products and pigs by-products was brought about by
   respectively in 2002. Fresh Pork and LTMP contributed                                      increased orders from commercial users such as
   to 4.9% and 4.7% of the Group’s total turnover                                             restaurants and canned food manufacturers.
   respectively. These two premium product segments
                                                     Management Discussion and Analysis 13




Gross Profit                                                                                Cost of Live Pigs
                                                                      (RMB’bn)
                                                                                              (1998-2002)
                                                                       6
                                                                                   5.5

Gross profit rose by RMB232 million to RMB1,230 million in 2002,       5
                                                                                                  5.2           5.1           5.1            5.0


translating into a 23.3% increase from the previous period. The        4
lower cost of production contributed to higher gross profit margin,
                                                                       3
which improved to 24.3% from 23.6% a year ago.
                                                                       2

                                                                       1
Expenses
                                                                       0
                                                                           1998           1999           2000          2001          2002
Selling and distribution costs increased by approximately 8.3%
                                                                                                         Year
from the previous year to RMB103.5 million. The increase was in
line with the higher turnover that the Group achieved. As a
percentage to sales, selling and distribution costs was around                             Operating Margins
2.05% to sales, down marginally from 2.25% of sales of last year.                             (1998-2002)

Administrative expenses increased by approximately 20.0% to           25.0%
RMB155.7 million due mainly to the increase in provision for
                                                                                                                                             19.2
                                                                      20.0%                                                   18.1
depreciation. Depreciation expenses increased by approximately                                    17.5          17.3
                                                                                   15.5

RMB17.5 million or 21.9% from the same period last year.              15.0%


                                                                      10.0%
Net Financial Income
                                                                      5.0%


Interest income increased by 37% to RMB11.1 million, from             0.0%
                                                                                  1998           1999       2000              2001          2002
RMB8.1 million a year ago. This was attributed to the Group’s large                                             Year
cash balance of RMB935.3 million as at 31 December 2002.
Interest expense decreased by 10% to RMB13.0 million due to lower interest rate charged on the unchanged
outstanding debt of RMB200 million which is denominated in Renminbi and bear interest ranging from 5% to 8%
(2001: 6% to 9%) per annum as at 31 December 2002.
14 Management Discussion and Analysis




   Tax


   The effective income tax rate of the Group for 2002 was approximately 14.0% compared with 18.5% in 2001. In
   accordance with various approval documents issued by the State Tax Bureau and the Local Tax Bureau of the
   PRC, the Group’s three operating subsidiaries Linyi Xincheng, Linyi Minsheng and Daqing Jinluo are entitled to
   Tax Holiday. With effect from 1 January 2001, Linyi Xincheng was subject to corporate income tax of 33% on its
   taxable profit upon expiry of the Tax Holiday on 31 December 2000. Linyi Minsheng and Daqing Jinluo
   commenced their first year’s tax exemption period from the financial year ended 31 December 2001 and 31
   December 2002 respectively. In 2002, profits contribution of Linyi Minsheng and Daqing Jinluo to the Group, in
   aggregate, increased from 42% in 2001 to 59% resulting a lower overall effective tax rate for the Group.


   Net Profit


   As a result of these factors, the Group achieved profit after tax of RMB822.8 million, an increase of 33.8% over
   the previous year and exceeded the Group’s forecast of RMB811 million stated in the Hong Kong listing document
   dated 21 October 2002.



                    Profit Before Tax Margins                                       EBITDA (1998-2000)
                            (1998-2002)                       (RMB’mn)

    20.0%                                                     1200
                                                 18.9                                                                   1055.7
                                       17.8
    18.0%
                       16.1
                               16.6                           1000
    16.0%                                                                                                     840.2

             13.5
    14.0%                                                      800
    12.0%                                                                                          601.5

    10.0%                                                      600
                                                                                        451.5

    8.0%
                                                               400          287.4
    6.0%
    4.0%                                                       200
    2.0%
    0.0%                                                          0
            1998      1999    2000     2001     2002                     1998        1999       2000       2001       2002

                              Year                                                              Year
                                                      Management Discussion and Analysis 15




Balance Sheet                                                                             Return on Assets (1998-2002)

                                                                         60.0%
The Group’s fixed assets increased 65.2% to RMB1,021 million as
                                                                                                       48.5    48.3
                                                                         50.0%
at 31 December 2002 from RMB617.8 million a year ago. This was                                43.7
                                                                                                                          39.5
                                                                         40.0%
a result of its acquisition of the Daqing plant and capacity expansion            34.6


in the Linyi plant. The Group’s net cash increased by RMB485.1           30.0%

million to RMB935.3 million as a result of its strong operating          20.0%

cashflow and new share issues. Shareholders’ equity rose by 65%          10.0%

to RMB2,530.0 million from RMB1,533.4 million. The Group’s net            0.0%
                                                                                 1998        1999    2000     2001       2002
tangible asset increased to RMB2.23 per share, from RMB1.46 per
                                                                                                      Year
share at 31 December 2001.


Net Cash Flow and Liquidity                                                              Return on Equity (1998-2002)

                                                                         80.0%
The Group had a net cash inflow of RMB306.8 million in 2002                                   71.9
                                                                         70.0%                        65.4
compared with RMB81.0 million a year ago. The higher cashflow            60.0%
                                                                                  61.1

                                                                                                               52.3
was primarily a result of a better operating performance, and an         50.0%
                                                                                                                          40.5
increase in funds raised from the issue of new shares in July 2002.      40.0%
                                                                         30.0%
These cash inflows more than offset the capital expenditures
                                                                         20.0%
incurred in its plant expansions.
                                                                         10.0%
                                                                         0.0%
                                                                                 1998        1999    2000     2001       2002
As at 31 December 2002, the Group had unsecured bank loan of
                                                                                                      Year
RMB200.0 million (2001: RMB200.0 million) bearing interest
ranging from 5% to 8% (2001: 6% to 9%) per annum and repayable
within one year. Such borrowings were all denominated in Renminbi. As at 31 December 2002, the Group also did
not use any financial instruments for hedging purposes (2001: Nil). As at 31 December 2002, the Group had cash
and cash equivalents of RMB935.3 million (2001: RMB450.2 million), of which 28.6 per cent., 71.2 per cent. and
0.2 per cent. (2001: 37.7 per cent., 61.8 per cent. and 0.5 per cent.) were denominated in Renminbi, US dollars and
Hong Kong dollars, respectively.
16 Management Discussion and Analysis




   Use of Proceeds                                               The remuneration of the employees of the Group
                                                                 includes salaries, bonuses and other fringe benefits.
   On 17 July 2002, People’s Food Holdings Limited               The Group has different rates of remuneration for
   entered into a placement agreement in Singapore for           different employees to be determined based on their
   the placement of 80,000,000 ordinary shares of                performance, experience, position and other factors in
   HK$0.50 each in the capital of the Company to                 compliance with the relevant PRC laws and regulations.
   professional, institutional and individual investors at the
   price of S$1.22 per Share. The net proceeds from the          In Year 2002, the Group continued to provide its
   placement, were approximately S$94.14 million                 employees with opportunities to learn skills in relation to
   (approximately RMB440 million) were intended to be            the computer technologies and business administration
   used for increasing the Group’s production capacity and       and provide training on the latest developments in
   working capital and for the Group’s advertising and           areas such as computer technologies, personal
   marketing.                                                    development, laws, regulations and economics.


   As at end of December 2002, the Group had applied             Gearing Ratio
   approximately S$26.0 million (approximately RMB120
   million) to increase the production capacity of the           As at 31 December 2002, the gearing ratio of the Group
   Group. Unutilized proceeds have been placed in our            was 7.9 per cent. (2001: 13.0 per cent.), which was
   PRC bank accounts and will be used for the                    computed by dividing the total amount of bank loans, by
   abovementioned intended applications.                         the equity of the Group as at 31 December 2002.


   Employees                                                     Contingent Liabilities


   As at 31 December 2002, the total number of                   As at 31 December 2002, the Group had no (2001: Nil)
   employees of the Group was approximately 8,900                material contingent liabilities.
   (2001: approximately 6,000) with total staff costs
   amounting to approximately RMB58.5 million (2001:
   approximately RMB49.3 million).
                                                      Management Discussion and Analysis 17




RISK MANAGEMENT                                             Operational Risks


The Group’s system of internal controls has a key role      Delivery disruptions that could lead to delayed or lost
in the identification and management of risk that are       deliveries
significant to the achievement of its business              While the management has operational procedures in
objectives. The Board believes that, in the absence of      place to minimalise the likelihood of any delays or lost
any evidence to the contrary the system of internal         deliveries, there are forces outside of the Group’s
control maintained by management that has been in           control, including weather conditions, political turmoil,
place throughout the financial year to date, is adequate    social unrest and strikes which could impact the
to meet the needs of the company in its current             operations.
business environment.
                                                            Illegal tampering of products
The system of internal controls provides reasonable,        Notwithstanding areas that out of the Group’s control,
but not absolute assurance that the company will not be     the Group’s sales team is responsible for overseeing
adversely affected by any event that could be               the dealership network and monitoring their progress.
reasonably foreseen as it strives to achieve its business   They will work with dealers to minimise illegal
objectives. However, the Board notes that no system of      tampering of products.
internal control can provide absolute assurance in this
regard, or absolute assurance against the occurrence of     Food contamination
material errors, poor judgement in decision-making,         The Group has achieved the HACCP and ISO 9002
human error, losses, fraud or other irregularities. The     certification for its Linyi plant, and is in the process of
major risks that the Group faces are as follows:            qualifying its other plants to the same quality standards.
                                                            All plants within the Group are based on the same
Financial Risks                                             stringent quality control and product safety procedures
                                                            as the Linyi plant so to ensure the same high quality
Details on the Group’s management of financial risks        standards.
are set out in Note 25 to the Financial Statements.
18 Management Discussion and Analysis




   Counterfeit products                                          Economic environment and political structure of the
   The Group’s “Jinluo” brand is trademarked. However, if        PRC
   any   counterfeit    products    are   discovered,     the    As the PRC undergoes economic, political and social
   management will take the necessary legal action in            change, the Group will have to adapt to changes as and
   consultation with the relevant PRC authorities to stop        when they happen. For example with the ascension into
   the counterfeiters and protect its brand name.                WTO, there is a possible threat of increased foreign
                                                                 competition in the future, so the Group has been
   Disruption of utility supply                                  constantly enhance its competitive edge by protecting
   The management of each plant in each region is                its “Jinluo” brand, enhancing its products, managing its
   expected to be in constant contact with suppliers of          operational costs, increasing overall operational
   utilities on an ongoing basis to minimalise the likelihood    efficiency and capacity utilization, and expanding its
   of any disruption to any given utility supply. In the event   production base and distribution channels, to gain
   that such a disruption occurs, the Group is confident         market share in the PRC.
   that its plant managers will ensure that supply is
   restored in the shortest time possible.                       Exposure to environmental liabilities
                                                                 The Group believes in social responsibility and
   Market and Country Related Risks                              contributing back to society. Therefore, the Group will
                                                                 ensure that its production facilities do not impact the
   Change in consumer preferences                                environment in any significant manner and will
   The Group’s sales team constantly monitors changes in         implement the necessary controls to ensure this, in
   consumer preferences by gathering feedback from               strict compliance with any new environmental standards
   consumers on a regular basis. A market trend analysis         or legislation which may evolve in the PRC.
   is subsequently communicated to management so that
   new products can be developed or existing products            Tax relief and changes in corporate tax rates
   can be improved to meet the taste preferences of              Currently, some of the Group’s subsidiaries are foreign
   consumers in any given region.                                investment enterprises established in the PRC and are
                                                                 therefore entitled to an exemption of income tax for the
   Changes in PRC laws and regulations                           first two profitable financial years of operation and a
   The Group believes that the PRC legal system will             50% relief from income tax for the following three
   continue to improve so as to ensure continued foreign         financial years. Upon the expiry of these tax incentives,
   investment into the country. In the meantime, the Group       the Group may be liable for the prevailing corporate tax
   will deal with any legal issue in close consultation with     rate, which currently is 33%. The current tax preference
   the relevant legislative authorities and seek their advice    for foreign investment enterprises may be subject to
   to ensure the interests of the Group are protected.           change or come under review. The Group may be
                                                      Management Discussion and Analysis 19




adversely impacted by such changes or changes to the       increase to approximately 900,000 tonnes in 2003. This
prevailing tax rate.                                       is in line with our expansion plans, and we are on track
                                                           to achieve our target pig processing capacity of
PROSPECTS                                                  1,100,000 tonnes by 2004.


The macro economic environment in the PRC remains          According to the Economist Intelligence Unit, the GDP
positive in 2003. The PRC economy is expected to grow      in the PRC will grow at an average annual rate of
by 7–8% in 2003. Against this background, consumer         approximately 7.8% for the period 2003 to 2006. Pork is
purchasing power is expected to remain high and rising     still part of the staple diet in the PRC, accounting for
affluence will continue to fuel demand for premium         approximately 68% of total meats consumed. According
quality meat products produced under more hygenic          to the PRC Meat Association, total meat consumption in
conditions. The Group, one of the leading producers of     the PRC is forecasted to grow by approximately 12%
high quality meat products with its brandname “Jinluo”,    between 2000 and 2005. The Board believes that with
is expected to be a major beneficiary of the rising        the Group’s sound business strategy, the recognition of
optimism at the macroeconomic level.                       the “Jinluo” brand, and the Group’s wide geographical
                                                           spread of operations, the Group will be able to take
The Daqing plant commenced commercial production in        advantage of the PRC’s growing domestic economy and
July 2002, and enjoyed a utilization rate of 46% based     rising consumer affluence. The Group will also likely be
on the weighted average processing capacity of 60,000      able to capitalize on the anticipated consolidation of the
tonnes. The Group earnings will benefit from the full-     meat processing industry in the coming years.
year contribution to earnings from Daqing plant in 2003.
                                                           Based on the factors listed above and barring any
In January 2003, the Group signed two agreements to        unforeseen circumstances, the Board is optimistic about
lease two production plants in the Henan Province, the     the Group’s performance in 2003.
PRC and in the Heilongjiang Province, the PRC
respectively. The sixth production plant leased from
Shangqiu Fuguan Food Enterprise Group Company
Limited and the seventh production plant which will be
rented from XingLong Forestry Bureau of the
Heilongjiang Province are expected to increase the
G r o u p ’s   annual   pig   processing   capacity   by
approximately 80,000 tonnes and approximately
100,000 tonnes respectively. With the addition of these
two plants, the Group’s pig processing capacity will
20 Production Base and Networks




     “by creating...
          ...greater market
                                  ”
Production Base and Networks 21
22 Directors and Senior Management Profiles




    DIRECTORS

    Executive Directors

    Mr. Ming Kam Sing, aged 46, is the Chairman of the Group. Mr. Ming is in charge of the overall strategy and direction
    of the Group. Mr. Ming graduated from the Shandong Medical College, PRC in 1981 with a degree in Medicine. From
    1981 to 1993, he served as a doctor in the Beijing Medical University Hospital and then the Xiehe Hospital. Mr. Ming
    has over 21 years of experience in health and medical industry. In 1993 he started his own business dealing in the sale
    of medical equipment and soon after, he founded the Group in 1994.

    Mr. Zhou Lian Kui, aged 44, is a Director of the Company. Mr. Zhou has overall responsibility for the operations and
    finance of the Group. Mr. Zhou graduated in 1980 from the Shandong University, PRC with a degree in Business
    Administration. From 1980 to 1984, he served as a sales personnel in the Linyi Food Company. Subsequently, in
    1984, Mr. Zhou was promoted to sales supervisor and in 1986, he was promoted to assistant manager. From 1989 to
    1994, he served as the factory manager of the Bancheng Meat Factory. Mr. Zhou has over 22 years of experience in
    food industry. Mr. Zhou is the co-founder of the Group. Mr. Zhou is the brother of Mr. Zhou Lian Liang.

    Mr. Zhou Lian Liang, aged 41, is a Director and general manager of the Company. Mr. Zhou has overall responsibility
    for the sales and marketing of the Group. Mr. Zhou graduated from Shandong Industrial University, PRC in 1984 with a
    degree in Engineering. From 1984 to 1987, he served as an officer in the planning department of the Linyi Industrial
    Bureau. He was primarily tasked with the supervision of certain enterprises to ensure that they carried out the plans
    that they submitted to the Linyi Industrial Bureau. Subsequently in 1987, Mr. Zhou was promoted to a supervisor. From
    1990 to 1994, he served as the assistant factory manager of the Bancheng Meat Factory. From 1994 to 1997, he
    served as the assistant general manager of Linyi Xincheng and has subsequently been appointed to be the general
    manager of Linyi Xincheng since 1997. Mr. Zhou has over 16 years of experience in the food industry. Mr. Zhou is the
    co-founder of the Group. Mr. Zhou is the brother of Mr. Zhou Lian Kui.

    Independent and non-executive Directors

    Mr. Chng Hee Kok, aged 54, was appointed as an independent non-executive Director of the Company on 6 February
    2001. He was awarded a Merit Schorlarship by the Singapore Government in 1967. He graduated with a Bachelor of
    Engineering (First Class Honours) degree from the University of Singapore in 1972 and a Master of Business
    Administration degree from the National University of Singapore in 1984. Mr. Chng is currently the Chief Executive
    Officer of NTUC Club and Chief Executive Officer of the NTUC Thrift and Loan Cooperative Ltd. and was a Member of
    Parliament, Singapore from 1984 to 2001. He served as the Chief Executive Officer of Scotts Holdings Ltd from 1995
    to 1997 and as the Chief Executive Officer of Yeo Hiap Seng Ltd from 1994 to 1995. Presently he is a Council Member
    and Director of the Singapore Institute of Directors and also a Board Member of the Sentosa Development
    Corporation. Mr. Chng also sits on the Boards of Directors of a number of public listed companies.

    Mr. Chan Kin Sang, aged 52, was appointed as an independent non-executive Director of the Company on 6
    February 2001. Mr. Chan is currently a senior partner of Messrs. Peter K.S. Chan & Co., Solicitors and Notaries. Mr.
    Chan has been a practising solicitor in Hong Kong since 1982. Mr. Chan graduated from the University of Hong Kong
    with a Bachelor of Laws degree in 1979. Mr. Chan was admitted as a notary public in 1997 and as a China-appointed
    attesting officer in 1999.
                                             Directors and Senior Management Profiles 23




Dr. Ow Chin Hock, aged 59, Dr. Ow is currently Ambassador-at-large at the Ministry of Foreign Affairs. He holds a
Bachelor of Arts (Honours in Economics), from the University of Singapore and the Master of Arts (Economics
Development) and PhD from Vanderbilt University, Tennesse, USA. Dr. Ow was a lecturer, senior lecturer and an
Associate Professor in the Department of Economics and Statistics, the University of Singapore and National
University of Singapore from 1972 to 1993.

SENIOR MANAGEMENT

Mr. Pang Wai Hong, aged 38, is the chief financial officer and a company secretary of the Group. Mr. Pang graduated
from Morrison Hill Technical Institute in Hong Kong with a diploma in Accountancy in1985. In 1999, Mr. Pang
graduated from the National University of Ireland, Ireland with a Masters degree in Science (finance). Mr. Pang has
been an associate member of Hong Kong Society of Accountants since 1993 and a fellow member of the Association
of Chartered Certified Accountants in the United Kingdom since 1995. Mr. Pang has more than 15 years’ experience in
areas of works such as auditing, accounting, taxation and corporate finance before joining the Group. Mr. Pang
worked with the International Accounting Practice of Deloitte Touche Tohmatsu before joining the Group in January
2001.

Ms. Yvonne Choo, aged 50, was appointed as a company secretary of the Group on 31 October 2000. Ms. Choo is a
fellow of the Institute of Chartered Secretaries and Administrators and the chairman of the Singapore Association of
the Institute of Chartered Secretaries and Administrators. Ms. Choo is also a member of the Governing Council of the
Singapore Institute of Directors. Ms. Choo has been in practice as a Chartered Secretary in Singapore for more than
20 years.

Mr. Yang Tian De, aged 42, is the accounts manager of the Group. Mr. Yang graduated from Shandong Economic
Institute, PRC with a degree in Accountancy in 1981. Mr. Yang served with the treasury department of the Linyi
Statistics Bureau first as an accountant from 1981 to 1984 and then subsequently as an assistant manager from 1984
to 1995. Mr. Yang joined the Group in March 1995.

Mr. Peng Zheng Tang, aged 52, is the production manager of the Group. Mr. Peng graduated from the Shandong
Agricultural University, PRC in 1968 with a degree in Animal Husbandry. From 1968 to 1979, Mr. Peng served as an
officer in the Linyi Animal Husbandry Bureau. From 1979 to 1988, Mr. Peng served as a supervisor in the abattoir of
Linyi Meat Factory. In 1988 Mr. Peng was promoted to an assistant manager of the Linyi Meat Factory and served in
that post till 1994. Mr. Peng joined the Group in January 1994.

Mr. Xia Chuan Liang, aged 49, is the sales and marketing manager of the Group. Mr. Xia obtained a degree in
Business Administration in 1980 from the Shandong Industrial University, PRC. From 1980 to 1984, Mr. Xia served as
a sales officer in the Linyi Food Company. Subsequently in 1984, Mr. Xia was promoted to be the sales manager and
served in that position till 1988. From 1988 to 1994, Mr. Xia served as the assistant manager of Linyi Foreign Trade
Cold Storage Factory and was in charge of the sale of frozen food products. Mr. Xia joined the Group in December
1994.
24 Directors and Senior Management Profiles




    Mr. Guo Jian, aged 38, is the personnel and administration manager of the Group. Mr. Guo graduated from Shandong
    Police Academy in the PRC in 1984 as a police inspector. From 1980 to 1988, Mr. Guo served as a supervisor in the
    security department of the Linyi Lunan Medicine Factory. From 1988 to 1994, Mr. Guo served as the chief security
    officer in the Linyi Jiuzhou Group. Mr. Guo joined the Group in December 1994.

    Mr. Wang Shan Fu, aged 46, is the research and development manager and quality control manager of the Group.
    Mr. Wang graduated from Shandong University, PRC with a degree in Philosophy in 1974. In 1974 Mr. Wang joined
    the planning department of the Linyi Food Bureau as an officer. In 1979, Mr. Wang was promoted to supervisor and
    served in that capacity till 1986. From 1986 to 1994, Mr. Wang served as an assistant manager with Linyi Food
    Company. Mr. Wang joined the Group in December 1994.

    Ms. Xu Hong Xia, aged 41, is the audit manager of the Group. Ms. Xu graduated from Shandong Economic Institute,
    PRC with a Business Administration degree in 1981. From 1981 to 1992, Ms. Xu served as an accountant in the Linyi
    Bancheng Supply and Marketing Cooperative. From 1992 to 1995, Ms. Xu served as the treasurer of Linyi Supply and
    Marketing Company. Ms. Xu joined the Group in March 1995.

    Ms. Wang Ying Yuan, aged 43, is the procurement manager of the Group. Ms. Wang graduated from Shandong
    University, PRC with a Marketing degree in 1987. From 1987 to 1989, Ms. Wang served as a cashier with Linyi Tobaco
    Company. From 1989 to 1995, Ms. Wang served as a procurement officer in Linyi Mineral Bureau. Mr. Wang joined
    the Group in February 1995.
                                                                                   Report of the Directors 25




The directors present their report and the audited financial statements of the Company and the Group for the year
ended 31 December 2002.

Principal activities

The principal activity of the Company is investment holding. Details of the principal activities of the subsidiaries are set
out in note 12 to the financial statements. There were no significant changes in the nature of the Group’s principal
activities during the year.

Listing

In addition to the listing of the Company’s shares on The Singapore Exchange Securities Trading Limited (the
‘‘SGX-ST’’) on 14 March 2001, the Company’s shares were listed on The Stock Exchange of Hong Kong Limited (the
‘‘HKSE’’) by way of introduction on 28 October 2002. As a result, the Company has a dual primary listing of its shares
on both the SGX-ST and the HKSE since 28 October 2002.

Results and dividends

Details of the results of the Company and the Group for the year ended 31 December 2002 and the state of affairs of
the Company and the Group at that date are set out in the financial statements on pages 42 to 44.

An interim dividend of RMB0.139 per ordinary share was declared on 28 August 2002. The directors proposed that a
final dividend of RMB0.190 per ordinary share amounting to approximately RMB215,332,000 be paid for the year
ended 31 December 2002.

Summary financial information

A summary of the published results and assets and liabilities of the Group for the last 5 financial years, as extracted
from the audited financial statements and reclassified as appropriate, is set out on page 4. This summary does not
form part of the audited financial statements.

Fixed assets

Details of movements in the fixed assets of the Group are set out in note 13 to the financial statements.

Acquisition and disposal of subsidiaries

No subsidiary was acquired or disposed of during the year.

Subsidiaries

Particulars of the Company’s subsidiaries are set out in note 12 to the financial statements.
26 Report of the Directors




    Issue of shares and debentures

    On 17 July 2002, the Company entered into a placing agreement for the placement of up to 80,000,000 ordinary
    shares of HK$0.50 each in the capital of the Company at the price of S$1.22 per share (the ‘‘Placement’’). In July 2002,
    80,000,000 ordinary shares of the Company were allotted and placed in Singapore for the total consideration of
    S$97,600,000, equivalent to approximately RMB460 million, before related expenses, pursuant to the Placement. The
    proceeds of the Placement are intended to be used for increasing the Group’s production capacity and working capital
    and for advertising and marketing.

    During the year,                             (‘‘Tongliao Jinluo’’),                            (‘‘Daqing Jinluo’’) and
                            (‘‘Meishan Jinluo’’), being wholly-owned subsidiaries of the Company, were established as
    wholly foreign-owned enterprises in the People’s Republic of China. The registered capitals of Tongliao Jinluo, Daqing
    Jinluo and Meishan Jinluo amounted to US$2,200,000, US$9,000,000 and RMB55,320,000 respectively and were
    paid up in full during the year. In addition, the registered capital of                              , a wholly-owned
    subsidiary of the Company, amounted to US$1,800,000, was paid up during the year.

    Save as disclosed above, none of the Company’s subsidiary issued any shares during the year.

    The Company and its subsidiaries did not issue any debentures during the year.

    Share capital and share options

    Details of movements in the Company’s share capital during the year, together with reasons therefor, are set out in
    note 21 to the financial statements.

    There is currently no share option scheme relating to the unissued shares of the Company.

    Bank borrowings

    Details of the bank borrowings of the Group are set out in note 20 to the financial statements.

    Pre-emptive rights

    There are no provisions for pre-emptive rights under the Company’s bye-laws or the laws of Bermuda which would
    oblige the Company to offer new shares on a pro rata basis to existing shareholders.

    Purchase, redemption or sale of listed securities of the Company

    Except as disclosed in the section headed ‘‘Issue of shares and debentures’’ above, neither the Company nor any of its
    subsidiaries purchased, redeemed or sold any of the Company’s listed securities during the year. The Company has
    issued a policy on dealing in the Company’s shares to employees of the Company pursuant to the Best Practice Guide
    issued by the SGX-ST. The policy sets out the implications of insider dealing in the shares, and includes guidance to
    employees on dealing in the Company’s shares, which is modelled after the Best Practice Guide with some
    modifications.
                                                                                 Report of the Directors 27




Material movements or transfers in reserves and provisions

Details of movements in the reserves of the Company and the Group during the year are set out in note 22 to the
financial statements.

There were no material transfers to or from provisions during the year except for normal amounts recognised as an
expense for such items as depreciation of fixed assets and provisions for trade debtors and income tax as disclosed in
the financial statements.

Distributable reserves

At 31 December 2002, the Company’s reserves available for distribution, calculated in accordance with the provision
of laws of Bermuda, amounted to approximately RMB51,000. The balance of approximately RMB557,229,000 in the
share premium account may be distributed in the form of fully paid bonus shares.

Major customers and suppliers

During the year, the five largest customers of the Group accounted for approximately 6% of the Group’s consolidated
turnover. In addition, the five largest suppliers of the Group accounted for approximately 7% of the Group’s
consolidated purchases for the year. Sales to the Group’s five largest customers and purchases from the Group’s five
largest suppliers accounted for less than 30% of the Group’s total sales and total purchases, respectively, for the year.

Bad and doubtful debts

The directors have taken reasonable steps to ascertain that proper action has been taken in relation to the writing off
of bad debts and the making of provision for doubtful debts, and have satisfied themselves that all known bad debts, if
any, have been written off and that, where necessary, adequate provision has been made for doubtful debts in these
financial statements.

At the date of this report, the directors are not aware of any circumstances which would render any amount written off
or provided for bad and doubtful debts in the Group inadequate to any substantial extent.

Current assets

The directors have taken reasonable steps to ascertain that any current assets which were unlikely to realise their
book values in the ordinary course of business have been written down to their estimated realisable values or
adequate provision has been made for the impairments in the values of such current assets in these financial
statements.

At the date of this report, the directors are not aware of any circumstances which would render the values attributed to
current assets in the consolidated financial statements misleading.
28 Report of the Directors




    Charges on assets and contingent liabilities

    Since the end of the year, and up to the date of this report, no charge on the assets of the Company or any companies
    in the Group has arisen which would secure the liabilities of any other person and no contingent liability has arisen.

    Ability to meet obligations

    Save as disclosed in note 24 to the financial statements, no contingent or other liability has become enforceable or is
    likely to become enforceable within the period of twelve months after the end of the year which, in the opinion of the
    directors, will or may substantially affect the ability of the Company and the Group to meet their obligations as and
    when they fall due.

    Other circumstances affecting the financial statements

    At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or in
    the financial statements which would render any amount stated in the financial statements of the Company and the
    Group misleading.

    Unusual items

    In the opinion of the directors, the results of the operations of the Company and the Group during the year have not
    been substantially affected by any item, transaction or event of a material and unusual nature.

    Unusual items after the financial year

    In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval
    between the end of the year and the date of this report which would affect substantially the results of the operations of
    the Company and the Group for the year in which this report is made.

    Post balance sheet events

    Details of the significant post balance sheet events of the Company and the Group are set out in note 27 to the
    financial statements.
                                                                               Report of the Directors 29




Directors

The directors during the year were:

Executive directors:

Ming Kam Sing
Zhou Lian Kui
Zhou Lian Liang

Non-executive and independent directors:

Chng Hee Kok
Chan Kin Sang

Subsequent to the balance sheet date, on 7 January 2003, Dr. Ow Chin Hock was appointed as an independent non-
executive director of the Company.

The directors of the Company, including the non-executive directors, are subject to retirement and re-election at the
forthcoming annual general meeting in accordance with the Company’s bye-laws.

In accordance with bye-law 86 of the Company’s bye-laws, Mr. Chng Hee Kok and Mr. Chan Kin Sang will retire by
rotation and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting. In
accordance with bye-law 85(2) of the Company, Dr. Ow Chin Hock will be eligible for re-election at the forthcoming
annual general meeting.

The retirement and re-election of the independent non-executive directors of the Company will be in accordance with
the relevant provisions of the bye-laws of the Company. Save as aforesaid, the Company has fully complied with the
Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on the HKSE (the
‘‘HKSE Listing Rules’’).

Directors’ and senior management’s biographies

Biographical details of the directors of the Company and the senior management of the Group are set out on pages 22
and 24 of the annual report.

Share option scheme

The Company does not operate any share option scheme.

Arrangements to enable directors to acquire shares or debentures

Neither at the end of nor at any time during the year was the Company, its holding company or any of its subsidiaries a
party to any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the
acquisition of shares or debentures of the Company or any other body corporate.
30 Report of the Directors




    Directors’ interests in shares

    According to the Register of Directors’ Shareholdings, the only directors who held office at the end of the financial year
    and who had an interest in shares or debentures of the Company or its related corporations either on 1 January 2002,
    or on 31 December 2002, or on 21 January 2003, were as follows:

    At 1 January 2002

    Name of director                                                                                      Direct interest Deemed interest
                                                                                                            Ordinary shares of HK$0.50
                                                                                                               each of the Company


    Ming Kam Sing (note i)                                                                                     113,648,889             592,327,306
    Zhou Lian Kui (note ii)                                                                                      4,666,624             592,327,306

    At 31 December 2002

    Name of director                                                                                      Direct interest Deemed interest
                                                                                                            Ordinary shares of HK$0.50
                                                                                                               each of the Company


    Ming Kam Sing (note i)                                                                                     113,648,889             592,327,306
    Zhou Lian Kui (note ii)                                                                                     10,666,624             592,327,306

    At 21 January 2003

    Name of director                                                                                      Direct interest Deemed interest
                                                                                                            Ordinary shares of HK$0.50
                                                                                                               each of the Company


    Ming Kam Sing (note i)                                                                                     113,648,889             592,327,306
    Zhou Lian Kui (note ii)                                                                                     10,666,624             592,327,306

    Notes:


    (i)      By virtue of the Companies Act, Chapter 50 of Singapore (‘‘Singapore Companies Act’’), Mr. Ming Kam Sing is deemed to be interested in the
             592,327,306 shares held by Maleque Limited by virtue of his interest of 65% in Maleque Limited.


    (ii)     By virtue of the Singapore Companies Act, Mr. Zhou Lian Kui is deemed to be interested in 592,327,306 Shares held by Maleque Limited by
             virtue of his interest of 25% in Maleque Limited.
                                                                                                    Report of the Directors 31




Directors’ interests in shares (Continued)

At 31 December 2002, the interests of the directors in the share capital of the Company or its associated corporations
(within the meaning of the Securities (Disclosure of Interests) Ordinance of the laws of Hong Kong (the ‘‘SDI
Ordinance’’)), as recorded in the register maintained by the Company pursuant to Section 29 of the SDI Ordinance,
were as follows:

                                                                                 Number of shares held and nature of interest
Name of director                                                                     Personal                 Corporate                        Total
                                                                                Ordinary shares of HK$0.50 each of the Company


Ming Kam Sing                                                                    113,648,889              592,327,306*                705,976,195
Zhou Lian Kui                                                                      10,666,624                            —             10,666,624

* These shares are held by Maleque Limited, a company incorporated in the British Virgin Islands, the issued share capital of which is owned as to 65%
  by Mr. Ming Kam Sing, 25% by Mr. Zhou Lian Kui and 10% by Mr. Zhou Lian Liang.


Save as disclosed above, none of the directors or their associates had any personal, family, corporate or other
interests in the equity securities of the Company or any of its associated corporations as defined in the SDI Ordinance.

Substantial shareholders
(as defined under the SDI Ordinance)

At 31 December 2002, the following parties had an interest of 10% or more in the issued share capital of the Company
that was recorded in the register required to be kept by the Company pursuant to Section 16(1) of the SDI Ordinance:

                                                                                                                             Percentage of the
Name                                                                           Number of shares held               Company’s share capital


Maleque Limited**                                                                             592,327,306                                   52.26%
Ming Kam Sing                                                                                 113,648,889                                   10.03%

** Maleque Limited is a company incorporated in the British Virgin Islands, the issued share capital of which is owned as to 65% by Mr. Ming Kam Sing,
   25% by Mr. Zhou Lian Kui and 10% by Mr. Zhou Lian Liang.


The above shareholdings are also disclosed in the section headed ‘‘Directors’ interests in shares’’ above.

Save as disclosed above, no person had an interest of 10% or more in the issued share capital of the Company that
was required to be recorded in the register pursuant to Section 16(1) of the SDI Ordinance.
32 Report of the Directors




    Connected/interested person/related party transactions

    In compliance with the HKSE Listing Rules, the rules of the SGX-ST and International Accounting Standards, the
    directors of the Company confirmed that there were no connected, interested person or related party transactions
    during the year under the review.

    Directors’ service contracts

    The Company entered into separate service agreements (‘‘Service Agreements’’) with Mr. Ming Kam Sing, Mr. Zhou
    Lian Kui and Mr. Zhou Lian Liang for an initial period of three years commencing from 1 January 2001. Such Service
    Agreements are renewable automatically for successive terms of one year each unless terminated by not less than
    three months’ notice in writing served by either party following the expiration of the end of the initial term or at any time
    thereafter.

    Apart from the foregoing, no director proposed for re-election at the forthcoming annual general meeting has a service
    contract with the Company which is not determinable by the Company within one year without payment, other than
    statutory compensation.

    Directors’ interests in contracts

    Except for the service contracts detailed above, no director had a material interest in any contract of significance to the
    business of the Group to which the Company, its holding company, or any of its subsidiaries was a party during the
    year.

    Code of Best Practice

    In the opinion of the directors, the Company has complied with the Code of Best Practice (the ‘‘Code’’) as set out in
    Appendix 14 of the HKSE Listing Rules since the listing of the Company’s shares on the HKSE on 28 October 2002,
    except that the independent non-executive directors of the Company are not appointed for a specific term as required
    by paragraph 7 of the Code, but are subject to retirement and re-election at the forthcoming annual general meeting in
    accordance with the Company’s bye-laws.

    Audit committee, nominating committee and remuneration committee

    Details of the Company’s audit committee, nominating committee and remuneration committee are set out in
    Statement of the Corporate Governance in pages 36 to 39.

    Auditors

    The auditors, Ernst & Young, Certified Public Accountants, Hong Kong, have expressed their willingness to accept re-
    appointment. A resolution for their re-appointment as auditors of the Company will be proposed at the forthcoming
    annual general meeting.
                                                                                Report of the Directors 33




Other information required by the SGX-ST

No material contracts to which the Company, its holding company, or any of its subsidiaries are a party and which
involved directors’ interests subsisted at the end of the financial year or have been entered into since the end of the
previous financial year.

On Behalf of the Board,




Ming Kam Sing                                              Zhou Lian Kui
Chairman                                                   Executive Director


Hong Kong
18 March 2003
34 Statement by Directors




    In the opinion of the directors:

    (a)   the accompanying balance sheets, statements of recognised gains and losses and profit and loss accounts of
          the Group and the Company and consolidated cash flow statement together with the notes thereto, as set out on
          pages 42 to 74, are drawn up so as to give a true and fair view of the state of affairs of the Company and of the
          Group as at 31 December 2002 and of the results of the business of the Company and of the Group and cash
          flows of the Group for the year then ended; and

    (b)   at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its
          debts as and when they fall due.

    The board of directors approved and authorised these financial statements for issue on 18 March 2003.

    On Behalf of the Board,




    Ming Kam Sing                                              Zhou Lian Kui
    Chairman                                                   Executive Director


    Hong Kong
    18 March 2003
                                                      Statement on Corporate Governance 35




The Company is committed to high standard of corporate governance in conducting its Group business and the Board
of Directors of the Company (the ‘‘Board’’) ensures that an effective self-regulatory and monitoring mechanism exists
and is practised. The Board fully supports and observes the Code of Corporate Governance issued by the Corporate
Governance Committee, Singapore and the requirements of the Code of Best Practice as set out in Appendix 14 of the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Board of Directors

The Board comprises six Directors, three of whom are independent and non-executive and whose collective
experience and contributions are valuable to the Company.

The Board members are:

Executive

Ming Kam Sing, Chairman
Zhou Lian Kui, Chief Executive Officer
Zhou Lian Liang

Independent and Non-Executive

Chng Hee Kok
Chan Kin Sang
Ow Chin Hock (appointed on 7 January 2003)

The principal functions of the Board are:

.    To approve the Board policies, strategies and financial objectives of the Company and to monitor the
     performance of Management;

.    To oversee the processes for evaluating the adequacy of internal controls, risk management, financial reporting
     and compliance;

.    To approve annual budgets, major funding proposals, investment and divestment proposals;

.    To approve the nominations of Board and appointment of key personnel;

.    To assume responsibility for corporate governance.

The role of the Chairman includes ensuring that Board meetings are held when necessary and sets the Board meeting
agenda in consultation with the company secretaries. The Chairman reviews most Board papers before they are
presented to the Board and ensures that Board members are provided with complete, adequate and timely
information.
36 Statement on Corporate Governance




   Board of Directors (Continued)

   The Chief Executive Officer has overall responsibilities for the operations and finance of the Company and its
   subsidiaries.

   The Board has access to any required information to fulfill their responsibilities. To facilitate access, Board members
   have been provided with phone numbers and e-mail particulars of the Company’s senior management and the
   company secretaries.

   The Board conducts regular scheduled meetings. Ad-hoc meetings are convened when circumstances require. The
   Company’s Bye-laws allow a Board meeting to be conducted by way of a tele-conference. The attendance of the
   Directors at meetings of the Board and the Board committees is provided on page 40 of this annual report.

   The company secretaries attend all Board meetings and ensure that board procedures are followed.

   In accordance with bye-law 86 of the Company’s bye-laws, Mr. Chng Hee Kok and Mr. Chan Kin Sang will retire by
   rotation and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting. As Dr. Ow
   Chin Hock was appointed as a Director on 7 January 2003, in accordance with bye-law 85(2) of the Company’s bye-
   laws, Dr. Ow Chin Hock will be eligible for re-election at the forthcoming annual general meeting.

   Audit Committee

   The Audit Committee (‘‘AC’’) was established on 8 February 2001 and re-constituted on 15 October 2002 and 7
   January 2003 respectively. The AC comprises three members, all of whom are independent and non-executive
   directors of the Company. The members of AC at the date of this annual report are:

   Chng Hee Kok, Chairman
   Chan Kin Sang
   Ow Chin Hock (appointed on 7 January 2003)

   The AC members have many years of experience in senior management positions and in the opinion of the Board,
   have sufficient financial management expertise to fulfill their roles.

   The AC conducts regular scheduled meetings, Ad-hoc meetings are convened when circumstances require. The
   attendances at AC meetings are provided on page 40 of this annual report.

   The AC performs the following main functions:

   (a)   reviews the financial and operating results and accounting policies of the Group;

   (b)   reviews the financial statements before their submission to the Board and the external auditors’ report on those
         financial statements;

   (c)   reviews the quarterly, half-yearly and annual announcement of results of the Group before submission to the
         Board for approval;
                                                        Statement on Corporate Governance 37




Audit Committee (Continued)

(d)   considers and reviews the assistance given by the management of the Group to the auditors;

(e)   reviews the external audit plans and the results of the external auditors’ examination and evaluation of the
      Group’s internal control system;

(f)   recommends the reappointment of the external auditors;

(g)   reviews interested person transactions;

(h)   reviews the internal audit plan and findings of the internal audit;

(i)   generally undertakes such other functions and duties as may be required by statute and the Listing Manual
      issued by the SGX-ST and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
      Limited, and by such amendments made thereto from time to time.

In performing its functions, the AC met with the internal and external auditors and reviewed the overall scope of both
the internal and external audits as well as the assistance given by Management to the auditors. The AC has also met
the external auditors without presence of Management.

The AC also reviews the internal auditors’ activities on a quarterly basis, commencing in 2003.

The AC has reviewed the Company’s risk assessment based on the information obtained from the external and
internal auditors on the Company’s internal controls and is of the opinion that there are adequate internal controls in
place.

In performing its functions, the AC:

(a)   has had full access to and cooperation of Management and has full discretion to invite any Director and
      executive officer to attend its meetings; and

(b)   has been given reasonable resources to enable it to discharge its functions properly.

The AC, having reviewed all non-audit services provided by the external auditors to the Group, are satisfied that the
nature and extent of such services would not affect the independence of the external auditors.

The AC has recommended to the Board the nomination of Ernst & Young, Certified Public Accountants, Hong Kong for
re-appointment as auditors of the Company at the forthcoming annual general meeting.
38 Statement on Corporate Governance




   Nominating Committee

   The Nominating Committee (‘‘NC’’) was constituted on 20 March 2002 and comprises the following members at the
   date of this annual report:

   Ow Chin Hock, Chairman (appointed on 18 March 2003)
   Chng Hee Kok
   Chan Kin Sang
   Ming Kam Sing

   A majority of the members of the NC are non-executive and independent directors.

   The key functions of the NC are to:

   (a)   develop and maintain a formal and transparent process for the appointment and re-appointment of members of
         the Board.

   (b)   recommend the appointment and re-appointment of Directors.

   (c)   decide how the Board’s performance may be evaluated, and prepare objective performance criteria to assess
         the effectiveness of the Board as a whole and the contribution of each Director.

   (d)   assess the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of
         the Board.

   (e)   review the independence of each Director, and to ensure that the Board comprises at least one-third
         independent Directors.

   In recommending a candidate for appointment/re-appointment to the Board, the NC considers, amongst other things,
   his contributions to the Board and his independent status.

   The NC had recommended that the three Directors retiring by rotation at this annual general meeting be re-elected.
   The Board accepted the NC’s recommendation and accordingly, the three Directors will be offering themselves for re-
   election at this annual general meeting.

   For the financial year ended 31 December 2002, the NC in considering the contribution of each Director to the
   effectiveness of the Board, reviewed the attendance and participation of the Director at Board and other Board
   committee meetings.

   The NC will initiate a performance evaluation to assess the effectiveness of the Board as a whole in the current
   financial year.
                                                          Statement on Corporate Governance 39




Remuneration Committee

The Remuneration Committee (‘‘RC’’) was constituted on 20 March 2002 and comprises the following members:

Chan Kin Sang, Chairman
Chng Hee Kok
Ow Chin Hock (appointed on 18 March 2003)
Ming Kam Sing

A majority of the members of the RC are non-executive and independent directors.

The primary function of the RC is to:

(a)   review and recommend to the Board in consultation with the Chairman of the Board, a framework of
      remuneration and to determine the specific remuneration packages and terms of employment for each of the
      executive directors and senior executives (those reporting directly to the Chairman of the Board) of the Group
      including those employees related to the executive directors and controlling shareholders of the Group.

(b)   establish and maintain an appropriate and competitive level of remuneration to attract, retain and motivate
      directors and key executives.

(c)   carry out its duties in a manner that it deems expedient, subject always to any regulations or restrictions that
      may be imposed by the Board from time to time.

In reviewing and determining the remuneration packages of the executive Directors and senior executives, the RC
shall consider, amongst other things, their responsibilities, skills, expertise and contribution to the Company’s
performance and if the remuneration packages are competitive and sufficient to ensure that the Company is able to
attract and retain the best available executive talent.

The RC has access to expert and professional advice in the field of executive compensation where required.

Details of the remuneration of the five highest paid employees (including the Company’s directors) are set out in Notes
6 and 7 to the Financial Statements. In view of the sensitive nature of other details of the remuneration for the key
management executives, the Board is of the opinion that such disclosure should not be made in this annual report and
should not present its remuneration policy before shareholders for approval at the annual general meeting.

Internal Controls

The Board believes that the system of internal controls maintained by the Company is sufficient to provide reasonable
assurances that the Group’s assets are safeguarded against loss from unauthorized use or disposition, transaction
are properly authorized and proper accounting records are maintained.
40 Statement on Corporate Governance




   Internal Audit

   The Company has its internal audit functions in place. The functions of the Internal Auditors are to:

   (a)   review the effectiveness of the Company’s material internal control

   (b)   provide assurance that key business and operational risks are identified and managed

   (c)   ensure that internal controls are in place and functioning as intended

   (d)   ensure that operations are conducted in an effective and efficient manner

   The Internal Auditors report primarily to the Audit Committee Chairman and make recommendations on their findings.

   Dealing In Securities Transactions

   The Company has issued a policy on dealing in the Company’s shares to employees of the Company pursuant to the
   Best Practice Guide issued by the SGX-ST. The policy sets out the implications of insider dealing in the Company’s
   shares, and includes guidance to employees on dealing in the Company’s shares, which is modelled after the Best
   Practice Guide with some modifications.

   Communication With Shareholders

   The Company and the Group are in regular, effective and fair communication with shareholders. Timely as well as
   detailed disclosure is made to the public in compliance with the SGX-ST’s guidelines.

   Information on the Company and the Group are regularly updated on the Company’s website at http://
   www.peoplesfood.com.sg.

   Interested Person Transactions

   In compliance with the rules of the SGX-ST, the Group confirms that there were no interested person transactions
   during the year under the review.

   Directors’ Attendance Record

   The following is the attendance record of meeting held by the Board, AC and NC meetings in 2002 :

                                                                               Number of meeting                 Average
                                                                                     held in 2002          attendance (%)


   Board                                                                                        8                     63
   Audit Committee                                                                              4                     84
   Nominating Committee                                                                         1                    100
   Remuneration Committee                                                                       0                    N/A
                                                                                 Report of the Auditors 41




To the members
People’s Food Holdings Limited
(Incorporated in Bermuda with limited liability)

We have audited the financial statements of People’s Food Holdings Limited set out on pages 42 to 74, which have
been prepared in accordance with International Financial Reporting Standards. These financial statements are the
responsibility of the Company’s directors whose opinion thereon is set out on page 34. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing issued by The International Federation
of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by the Company’s directors, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements give a true and fair view of the financial position of the Company and of the
Group as at 31 December 2002 and of the profit of the Company and of the Group and the cash flows of the Group for
the year then ended in accordance with International Financial Reporting Standards and the disclosure requirements
of the Hong Kong Companies Ordinance.




Ernst & Young
Certified Public Accountants

Hong Kong
18 March 2003
42 Profit and Loss Accounts
    Year ended 31 December 2002




                                                       Group                     Company

                                                    2002            2001        2002          2001
                                       Notes    RMB’000         RMB’000      RMB’000       RMB’000


    TURNOVER                            3      5,056,763       4,236,880      276,918      130,612
    Cost of sales                              (3,826,730)     (3,238,988)         —             —


    GROSS PROFIT                               1,230,033         997,892      276,918      130,612


    Other revenue                       3         11,147           8,138          61            47
    Selling and distribution costs              (103,463)         (95,515)         —             —
    Administrative expenses                     (155,696)       (129,760)     (17,283)       (2,094)
    Other operating expenses                      (12,345)        (12,178)         —             —


    PROFIT FROM OPERATING ACTIVITIES    4        969,676         768,577      259,696      128,565


    Finance costs                       5         (13,035)        (14,459)         —             —


    PROFIT BEFORE TAX                            956,641         754,118      259,696      128,565


    Tax                                 8       (133,883)       (139,276)          —             —


    NET PROFIT FROM ORDINARY
      ACTIVITIES ATTRIBUTABLE TO
      SHAREHOLDERS                      9        822,758         614,842      259,696      128,565


    DIVIDENDS                           10       372,864         230,678      372,864      230,678


    EARNINGS PER SHARE                  11
      Basic                                     RMB0.76         RMB0.60          N/A           N/A


      Diluted                                        N/A             N/A         N/A           N/A
                                           Statements of Recognised Gains and Losses 43
                                                                                  Year ended 31 December 2002




                                                                Group                     Company

                                                             2002          2001         2002            2001
                                                          RMB’000       RMB’000    RMB’000          RMB’000


Net gain not recognised in the profit and loss account         —             —            —               —


Net profit from ordinary activities attributable to the
  shareholders                                            822,758       614,842      259,696         128,565


Total recognised gains                                    822,758       614,842      259,696         128,565
44 Balance Sheets
   31 December 2002




                                                                Group                     Company

                                                            2002           2001         2002           2001
                                                 Notes   RMB’000        RMB’000      RMB’000        RMB’000


   NON-CURRENT ASSETS
   Investments in subsidiaries                    12            —             —       497,043       497,043
   Fixed assets                                   13     1,020,844       617,838           —             —
   Deposits                                       14        77,710            —            —             —


                                                         1,098,554       617,838      497,043       497,043


   CURRENT ASSETS
   Inventories                                    15      435,848        373,737           —             —
   Trade debtors                                  16      480,217        420,767           —             —
   Due from subsidiaries                          12           —              —       665,823       229,421
   Deposits, prepayments and other
     receivables                                            8,740         27,153           —             —
   Cash and bank balances                         17      935,303        450,213           51           734


                                                         1,860,108      1,271,870     665,874       230,155


   CURRENT LIABILITIES
   Trade creditors                                18       76,739         66,198           —             —
   Accruals and other creditors                   19      122,062         67,765        2,294            67
   Interest-bearing bank loans                    20      200,000        200,000           —             —
   Provision for tax                                       29,919         22,357           —             —


                                                          428,720        356,320        2,294            67


   NET CURRENT ASSETS                                    1,431,388       915,550      663,580       230,088


                                                         2,529,942      1,533,388    1,160,623      727,131


   CAPITAL AND RESERVES
   Issued capital                                 21       603,343       560,943      603,343       560,943
   Proposed final dividend                        10       215,332       106,386      215,332       106,386
   Reserves                                       22     1,711,267       866,059      341,948        59,802


                                                         2,529,942      1,533,388    1,160,623      727,131




                                 Ming Kam Sing                       Zhou Lian Kui
                                    Director                            Director
                                                         Consolidated Cash Flow Statement 45
                                                                         Year ended 31 December 2002




                                                                                2002           2001
                                                                            RMB’000        RMB’000


CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax                                                            956,641        754,118
Adjustments for:
  Depreciation                                                                97,184         79,731
  Provision for doubtful debts                                                 3,400          4,000
  Interest expenses                                                           13,035         14,459
  Interest income                                                            (11,147)        (8,138)


Operating profit before working capital changes                            1,059,113        844,170


Working capital adjustments:
  Increase in trade debtors                                                  (62,850)      (121,259)
  Decrease/(increase) in inventories                                         (62,111)        20,533
  Decrease/(increase) in deposits, prepayments and
     other receivables                                                        18,413         (3,150)
  Increase in trade creditors                                                 10,541         13,906
  Increase in accruals and other creditors                                    54,297         29,935
  Decrease in amount due to a director                                             —           (694)


                                                                           1,017,403        783,441


Interest paid                                                                (13,035)       (14,459)
Interest received                                                             11,147          8,138
Tax paid                                                                    (126,321)      (142,497)


Net cash generated from operating activities                                 889,194        634,623


NET CASH USED IN INVESTING ACTIVITIES
  Purchases of fixed assets                                                 (500,190)      (260,486)
  Increase in deposits for acquisition of fixed assets                       (77,710)            —
  Increase in time deposits with original maturity of more than
     three months when acquired                                             (178,314)      (272,167)


                                                                            (756,214)      (532,653)


                                                                                        (Continued)
46 Consolidated Cash Flow Statement (Continued)
    Year ended 31 December 2002




                                                                          2002        2001
                                                                       RMB’000     RMB’000


    CASH FLOWS FROM FINANCING ACTIVITIES
      Drawdown of bank loans                                            200,000    197,500
      Repayment of bank loans                                          (200,000)   (220,000)
      Dividends paid                                                   (263,918)   (224,292)
      Issue of shares                                                   457,451    254,934
      Share issue expenses                                              (19,737)    (29,119)


    Net cash inflow/(outflow) from financing activities                 173,796     (20,977)


    NET INCREASE IN CASH AND CASH EQUIVALENTS                           306,776     80,993
    Cash and cash equivalents at beginning of year                      178,046     97,053


    CASH AND CASH EQUIVALENTS AT END OF YEAR                            484,822    178,046


    ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS
      Cash and bank balances                                            935,303    450,213
      Time deposits with original maturity of more than three months
        when acquired                                                  (450,481)   (272,167)


                                                                        484,822    178,046
                                                                   Notes to Financial Statements 47
                                                                                                      31 December 2002




1.   CORPORATE INFORMATION

     The Company was incorporated in Bermuda as an exempted company with limited liability under the Companies
     Act 1981 of Bermuda on 31 August 2000. The registered office of the Company is located at Clarendon House, 2
     Church Street, Hamilton HM11, Bermuda. In the opinion of the directors, the ultimate holding company is
     Maleque Limited, a company incorporated in the British Virgin Islands.

     On 14 March 2001, the Company’s shares were successfully listed on The Singapore Exchange Securities
     Trading Limited (the ‘‘SGX-ST’’). In addition, on 28 October 2002, the Company’s shares were listed on The
     Stock Exchange of Hong Kong Limited (the ‘‘HKSE’’).

     The Company is an investment holding company. The principal activities of the Company’s subsidiaries are set
     out in note 12 to the financial statements. There were no significant changes in the nature of the subsidiaries’
     principal activities during the year.

     The Group mainly operates in the People’s Republic of China (the ‘‘PRC’’), and employed approximately 8,900
     employees as at 31 December 2002 (31 December 2001 : approximately 6,000 employees).

     The consolidated financial statements of the Company for the year ended 31 December 2002 were authorised
     for issue in accordance with a resolution of the directors passed on 18 March 2003.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of preparation

     The financial statements have been prepared under the historical cost convention and in accordance with
     International Financial Reporting Standards, which comprise standards and interpretations approved by the
     International Accounting Standards Board, and International Accounting Standards (‘‘IAS’’) and Standing
     Interpretations Committee interpretations approved by The International Accounting Standards Committee that
     remain in effect.

     The Group’s operations are principally conducted in the PRC. Accordingly, the consolidated financial statements
     have been prepared in Renminbi (‘‘RMB’’), being the functional currency of all the principal companies in the
     Group.

     Basis of presentation and consolidation

     The consolidated financial statements for the year ended 31 December 2002 comprise the financial statements
     of the Company and all of its subsidiaries for that year, after the elimination of all material intercompany
     transactions. The results of subsidiaries acquired or disposed of during the year are consolidated from or to their
     effective dates of acquisition or disposal, respectively. Acquisitions of subsidiaries are accounted for using the
     purchase method of accounting.
48 Notes to Financial Statements
    31 December 2002




    2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Basis of presentation and consolidation (Continued)

         Pursuant to a group restructuring exercise (the ‘‘Restructuring Exercise’’) to rationalise the structure of the
         Group in preparation for the initial public offering of the Company’s shares on the SGX-ST, on 6 February 2001,
         the Company became the holding company of the subsidiaries comprising the Group. This was accomplished by
         acquiring the entire issued share capital of Loampit Limited (‘‘Loampit’’), the then holding company of certain of
         the subsidiaries as set out in note 12 to the financial statements, at a consideration of approximately
         RMB497,043,000, which was based on the consolidated net tangible asset value of Loampit and its subsidiaries
         as at 31 December 1999.

         The consolidated financial statements for the year ended 31 December 2001 have been prepared by adopting
         uniting of interests method of accounting as a result of the Restructuring Exercise completed on 6 February
         2001 involving the entities under common control. Under this method, the Company has been treated as the
         holding company of its subsidiaries for the financial year presented rather than from the date of acquisition of the
         subsidiaries. Accordingly, the consolidated results of the Group for the year ended 31 December 2001 include
         the results of the Company and its subsidiaries with effect from 1 January 2001 or since their respective dates of
         incorporation/establishment, where this is a shorter period. In the opinion of the directors, the consolidated
         financial statements for the year ended 31 December 2001 prepared on such basis, present more fairly the
         results, cash flows and state of affairs of the Group as a whole.

         All significant intra-group transactions and balances are eliminated on consolidation.

         Revenue recognition

         Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the
         revenue can be measured reliably, on the following bases:

         (i)     the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer,
                 provided that the Group maintains neither managerial involvement to the degree usually associated with
                 ownership, nor effective control over the goods sold;

         (ii)    interest income, on a time proportion basis taking into account the principal outstanding and the effective
                 interest rate applicable; and

         (iii)   dividend income, when the shareholders’ right to receive the payment is established.

         Operating leases

         Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are
         accounted for as operating leases. Rentals applicable to such operating leases are charged to the profit and loss
         account on the straight-line basis over the lease terms.
                                                                   Notes to Financial Statements 49
                                                                                                      31 December 2002




2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Financial instruments

     Financial instruments carried on the balance sheet included cash and bank balances, trade debtors, other
     receivables, trade creditors, other creditors and bank loans. The particular recognition methods adopted are
     disclosed in the individual accounting policy statements associated with each item.

     Fixed assets and depreciation

     Fixed assets are stated at cost less accumulated depreciation and any accumulated impairment. The cost of an
     asset comprises its purchase price and any directly attributable costs of bringing the asset to its working
     condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation,
     such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is
     incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in
     the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is
     capitalised as an additional cost of that asset.

     Depreciation is calculated on the straight-line basis to write off the cost of each asset over the following
     estimated useful lives:

     Leasehold land and buildings                          The shorter of the lease terms and 50 years
     Leasehold improvements                                The shorter of the lease terms and 10 years
     Plant and machinery                                   10 years
     Furniture, fixtures and office equipment              5 years
     Motor vehicles                                        5 years


     The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is the
     difference between the sales proceeds and the carrying amount of the relevant asset.

     Impairment of assets

     The carrying amounts of assets are reviewed for impairment whenever events or changes in circumstances
     indicate that the carrying amount of an asset may exceed the recoverable amount. If, as a result of the review, it
     is determined that the carrying amount of an asset exceeds its recoverable amount, an impairment loss is
     immediately recognised in the profit and loss account.

     The recoverable amount is the higher of an asset’s net realisable value and value in use. The net realisable
     value is the estimated amount obtainable from the sale of the asset in an arm’s length transaction, between
     knowledgeable and willing parties, less the costs of disposal. The value in use is the present value of the
     estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the
     end of its useful life. Recoverable amounts are estimated for individual assets or, where this is not possible, for
     the cash-generating unit of which the assets form part.
50 Notes to Financial Statements
    31 December 2002




    2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Impairment of assets (Continued)

         If there is any indication that an impairment loss recognised for an asset no longer exists or has decreased, the
         recoverable amount is estimated and compared to the carrying amount. If there has been a change in the
         estimates used to determine an asset’s recoverable amount since the last impairment loss was recognised, the
         carrying amount of the asset is increased to the recoverable amount, not exceeding the carrying amount of the
         asset (net of depreciation or amortisation) would have had if the impairment loss had not previously been
         recognised. Such reversals of impairment losses are credited to the profit and loss account.

         Subsidiaries

         A subsidiary is a company in which the Company has the power to control its financial and operating policies so
         as to obtain benefits from its activities, notwithstanding the proportion of its equity interest in that company.

         Investments in subsidiaries are stated at cost less any impairment losses.

         Inventories

         Inventories are stated at the lower of cost and net realisable value after making due allowance for obsolescence
         on slow moving items. Cost is determined on the first-in, first-out basis and, in the case of work in progress and
         finished goods, comprises direct materials, direct labour and an appropriate proportion of manufacturing
         overheads based on normal level of activities. Net realisable value is based on estimated selling prices less any
         estimated costs to be incurred to completion and disposal.

         Trade and other creditors

         Liabilities for trade and other creditors which are normally settled on credit terms of not more than 30 days, are
         carried at cost which is the fair value of the consideration to be paid in the future for goods and services
         received, whether or not billed to the Group.

         Trade debtors

         Trade debtors, which generally have credit terms of 30 to 60 days, are recognised and carried at original invoice
         amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection
         of the full amount is no longer probable. Bad debts are written off when identified.

         Provisions and contingencies

         A provision is recognised when there is a present obligation, legal or constructive, as a result of a past event and
         it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
         and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed regularly and
         adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount
         of a provision is the present value of the expenditures expected to be required to settle the obligation.
                                                                    Notes to Financial Statements 51
                                                                                                        31 December 2002




2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Provisions and contingencies (Continued)

     Contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of
     an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the
     financial statements but disclosed when an inflow of economic benefits is probable.

     Borrowing costs

     Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e. assets
     that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as
     part of cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially
     ready for their intended use or sale. Investment income earned on the temporary investment of specific
     borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.
     Other borrowing costs are expensed in the period in which they are incurred.

     Retirement benefits and pension costs

     Pursuant to the relevant regulations of the PRC government, the subsidiaries operating in the PRC have
     participated in a local municipal government retirement benefits scheme (the ‘‘Scheme’’), whereby the PRC
     subsidiaries are required to contribute a certain percentage of the basic salaries of their employees to the
     Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement
     benefits obligations of all existing and future retired employees of the PRC subsidiaries. The only obligation of
     the Group with respect to the Scheme is to pay the ongoing required contributions under the Scheme mentioned
     above. Contributions under the Scheme are charged to the profit and loss account as incurred. There are no
     provisions under the Scheme whereby forfeited contributions may be used to reduce future contributions.

     The Group has participated in a defined contribution Mandatory Provident Fund retirement benefits scheme (the
     ‘‘MPF Scheme’’) for its employees in Hong Kong who are eligible to participate in the MPF Scheme, in
     accordance with the Mandatory Provident Fund Schemes Ordinance. The MPF Scheme became effective from
     1 March 2001. Contributions are made based on a percentage of the employees’ basic salaries and are charged
     to the profit and loss account as they become payable in accordance with the rules of the MPF Scheme. The
     assets of the MPF Scheme are held separately from those of the Group in an independently administered fund.
     The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme,
     except for the Group’s employer voluntary contributions, which are refunded to the Group when the employee
     leaves employment prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.

     Tax

     PRC corporate income tax is provided at rates applicable to enterprises in the PRC on income for financial
     reporting purposes, as adjusted for income and expense items which are not assessable or deductible for
     income tax purposes.
52 Notes to Financial Statements
    31 December 2002




    2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Tax (Continued)

         Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date
         between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
         Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised
         for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent
         that it is probable that taxable profit will be available against which the deductible temporary differences, carry-
         forward of unused tax assets and unused tax losses can be utilised.

         Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when
         the asset is realised or the liability is settled, based on the tax rates that have been enacted at the balance sheet
         date or subsequently enacted.

         Foreign currencies

         The Group maintains its accounting records in RMB and transactions arising in foreign currencies are translated
         into RMB at the applicable rates of exchange ruling at the transaction dates. Monetary assets and liabilities
         denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange
         ruling at that date. Exchange differences are dealt with in the profit and loss account.

         On consolidation, the results of the Company and its non-PRC subsidiaries are translated into RMB at the
         applicable rates of exchange ruling at the dates of the transactions and the assets and liabilities of the Company
         and its non-PRC subsidiaries are translated into RMB at the applicable rates of exchange ruling at the balance
         sheet date. The resulting translation differences, if any, are included in the exchange fluctuation reserve.

         Research and development costs

         All research costs are charged to the profit and loss account as incurred.

         Expenditure incurred on projects to develop new products is capitalised and deferred only when the projects are
         clearly defined; the expenditure is separately identifiable and can be measured reliably; there is reasonable
         certainty that the projects are technically feasible; and the products have commercial value. Product
         development expenditure which does not meet these criteria is expensed when incurred.

         Deferred development costs are amortised using the straight-line basis over the commercial lives of the
         underlying products of not exceeding five years, commencing from the date when the products are put into
         commercial production.

         At each balance sheet date, the Group assesses whether there is any indicator of impairment. If any such
         indication exists, the recoverable amount is estimated.
                                                                      Notes to Financial Statements 53
                                                                                                           31 December 2002




2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Research and development costs (Continued)

     During each of the financial years ended 31 December 2001 and 2002, all research and development costs
     incurred were not significant to the Group and were charged to the profit and loss account in the years when they
     were incurred.

     Related parties

     Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or
     exercise significant influence over the other party in making financial and operating decisions. Parties are also
     considered to be related if they are subject to common control or common significant influence. Related parties
     may be individuals or corporate entities.

     Dividends

     Final dividends proposed by the directors are classified as an allocation of retained profits on a separate line
     within the capital and reserves section of the balance sheets, until they have been approved by the shareholders
     at general meeting. When these dividends are approved by the shareholders and declared, they are recognised
     as a liability.

     Interim dividends are simultaneously proposed and declared, because the Company’s memorandum and
     articles of association grant the directors authority to declare interim dividends. Consequently, interim dividends
     are recognised directly as a liability when they are proposed and declared.

     Cash and cash equivalents

     Cash on hand and in banks are carried at cost.

     For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash on hand and
     in banks, demand deposits and short term highly liquid investments which are readily convertible into known
     amounts of cash and subject to insignificant risk of changes in value, and have a short maturity of generally
     within three months when acquired.

     For the purpose of the balance sheet, cash and bank balances comprise cash on hand and at banks, including
     term deposits, which are not restricted as to use.

     Loans and borrowings

     All loans and borrowings are initially recognised at cost, being the fair value of the consideration received and
     including acquisition charges associated with the loans or borrowings.
54 Notes to Financial Statements
    31 December 2002




    3.   TURNOVER AND REVENUE

         Turnover represents the net invoiced value of goods sold, after allowances for returns and trade discounts, and
         after elimination of all significant intra-group transactions. The Group’s turnover is principally derived in the PRC.

         An analysis of the Group’s turnover and revenue is as follows:

                                                                                                            Group

                                                                                                        2002             2001
                                                                                                    RMB’000          RMB’000


         Turnover — Sale of goods                                                                  5,056,763        4,236,880
         Interest income                                                                              11,147             8,138


         Total revenue                                                                             5,067,910        4,245,018


         A further analysis of the Group’s turnover and revenue by activity is set out in note 23 to the financial statements.

         The turnover of the Company for the year ended 31 December 2002 represents dividend income from its
         subsidiaries and has been eliminated on consolidation (2001 : RMB130,612,000).
                                                                                    Notes to Financial Statements 55
                                                                                                                               31 December 2002




4.   PROFIT FROM OPERATING ACTIVITIES

     Profit from operating activities is arrived at after charging/(crediting):

                                                                                        Group                                Company

                                                                                   2002                 2001               2002                2001
                                                                Note          RMB’000             RMB’000            RMB’000              RMB’000


     Cost of inventories sold                                                3,826,730           3,238,988                    —                    —
     Depreciation                                                                97,184              79,731                   —                    —
     Operating lease rentals on land and
           buildings                                                              4,555              18,531                   —                    —
     Staff costs (excluding directors’
           remuneration (note 6))                                                63,845              53,638                 650                  454
     Less: Retirement scheme contributions                                       (3,200)              (2,603)                 —                    —
               Amount included in research and
                  development costs below                                        (2,154)              (1,699)                 —                    —


                                                                                 58,491              49,336                 650                  454


     Retirement scheme contributions                                              3,200                2,603                  —                    —
     Research and development costs                                               8,945                9,885                  —                    —
     Provision for doubtful debts                                                 3,400                4,000                  —                    —
     Professional expenses                                       (a)             16,694                1,980            14,194                     —
     Interest income                                                            (11,147)              (8,138)                (61)               (47)

     Note:


     (a)      The professional expenses of the Group included auditors’ remuneration of approximately RMB2.5 million for the year ended 31
              December 2002 (2001 : RMB2.0 million) and professional service fees of approximately RMB4.3 million (2001 : Nil) paid to the auditors in
              connection with the listing of the Company’s shares on the HKSE. The professional expenses of the Company included professional
              service fees of approximately RMB4.3 million (2001 : Nil) paid to the auditors in connection with the listing of the Company’s shares on
              the HKSE.
56 Notes to Financial Statements
    31 December 2002




    5.   FINANCE COSTS

                                                                     Group                         Company

                                                                  2002            2001            2002            2001
                                                              RMB’000         RMB’000        RMB’000         RMB’000


         Interest expense on bank loans, wholly
           repayable within five years                          13,035          14,459               —              —


    6.   DIRECTORS’ REMUNERATION

         Directors’ remuneration disclosed pursuant to the Rules Governing the Listing of Securities on the HKSE and
         Section 161 of the Hong Kong Companies Ordinance is as follows:

                                                                                                     Group

                                                                                                  2002            2001
                                                                                             RMB’000         RMB’000


         Fees                                                                                      419             395
         Other emoluments:
           Salaries, allowances and benefits in kind                                             6,360           6,360
           Performance related bonuses                                                               —           1,729
           Pension scheme contributions                                                              —              —


                                                                                                 6,360           8,089


                                                                                                 6,779           8,484


         Fees include approximately RMB419,000 (2001 : RMB395,000) payable to the independent non-executive
         directors. There were no other emoluments payable to the independent non-executive directors during the year
         (2001 : Nil).

         Each of the three executive directors’ remuneration fell within the band of HK$1,500,001 to HK$2,000,000 and
         each of the two independent non-executive directors’ remuneration fell within the band of Nil to HK$1,000,000.

         There was no arrangement under which a director waived or agreed to waive any remuneration during the year.
                                                                Notes to Financial Statements 57
                                                                                                   31 December 2002




6.   DIRECTORS’ REMUNERATION (Continued)

     The remuneration of the directors of the Company analysed into the following bands is disclosed in compliance
     with paragraph 1207.11 of Chapter 12 of the Listing Manual of the SGX-ST:

                                                                                          Group
                                                                                   Independent
                                                                 Executive        non-executive
                                                                  directors            directors             Total


     Below S$250,000
       (equivalent to below approximately RMB1,210,000)                  —                     2                 2
     S$250,000 to below S$500,000
       (equivalent to approximately RMB1,210,000 to
       below approximately RMB2,420,000)                                  3                   —                  3


                                                                          3                    2                 5


7.   FIVE HIGHEST PAID EMPLOYEES

     The five highest paid employees during the year included three (2001 : three) directors, details of whose
     remuneration are set out in note 6 above. Details of the remuneration of the remaining two (2001 : two) non-
     director, highest paid employees are as follows:

                                                                                                Group

                                                                                             2002             2001
                                                                                         RMB’000          RMB’000


     Salaries, allowances and benefits in kind                                              1,494            1,478
     Performance related bonuses                                                                —               —
     Pension scheme contributions                                                               26              12


                                                                                            1,520            1,490


     The remuneration of each of the two non-director, highest paid employees fell within the band of Nil to
     HK$1,000,000.
58 Notes to Financial Statements
    31 December 2002




    8.   TAX

                                                                                                          Group

                                                                                                       2002             2001
                                                                                                  RMB’000          RMB’000


         PRC                                                                                       133,883          139,276


         Hong Kong profits tax has not been provided as the Group did not generate any assessable profits arising in
         Hong Kong during the year (2001 : Nil).

         In accordance with various approval documents issued by the State Tax Bureau and the Local Tax Bureau of the
         PRC, Linyi Xincheng Jinluo Meat Products Co., Ltd. (‘‘Linyi Xincheng’’), Linyi Minsheng Food Development Co.,
         Ltd. (‘‘Linyi Minsheng’’),                        (‘‘Daqing Jinluo’’),                         (‘‘Xiangtan Jinluo’’),
                                      (‘‘Tongliao Jinluo’’) and                         (‘‘Meishan Jinluo’’), wholly-owned
         subsidiaries of the Company established as wholly foreign-owned enterprises (‘‘WOFEs’’) in the PRC, are
         entitled to an exemption from the PRC state and local corporate income tax for the first two profitable financial
         years of their operations and thereafter a 50% relief from the state corporate income tax of the PRC for the
         following three financial years (the ‘‘Tax Holiday’’). Upon expiry of the tax relief period, the usual PRC corporate
         income tax rate of 33%, comprising a state corporate income tax rate of 30% and a local corporate income tax
         rate of 3%, is applicable to them.

         Upon expiry of the Tax Holiday in the financial year ended 31 December 2000, Linyi Xincheng is subject to an
         income tax rate of 33% on its assessable profit for the year (2001 : 33%).

         The two years’ tax exemption periods for Linyi Minsheng and Daqing Jinluo have commenced in the financial
         years ended 31 December 2001 and 2002, respectively, under local jurisdiction.

         The two years’ tax exemption periods for Xiangtan Jinluo, Tongliao Jinluo and Meishan Jinluo have not
         commenced during the year as they did not generate any net assessable profits attributable to their operations in
         the PRC during the year.

         Tax has not been provided by the Company as the Company did not derive any assessable profits during the
         year (2001 : Nil).

         No deferred tax has been provided as the Group and the Company did not have any significant temporary
         differences which gave rise to a deferred tax asset or liability at the balance sheet date for both years presented.

         The Group and the Company have no income tax consequences attaching to the payment of dividends by the
         Company to its shareholders.
                                                                   Notes to Financial Statements 59
                                                                                                     31 December 2002




8.    TAX (Continued)

      A reconciliation of the expected tax expense with the actual tax expense is presented below:

                                                                                                    Group

                                                                                                 2002            2001
                                                                                             RMB’000         RMB’000


      Profit before tax                                                                       956,641         754,118


      Tax at the applicable tax rate of 33%                                                   315,692         248,859
      Non-taxable and non-deductible items and others, net                                       4,050           1,320
      Tax exemption of Linyi Minsheng and Daqing Jinluo                                      (185,859)        (110,903)


      Actual PRC corporate income tax                                                         133,883         139,276


9.    NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

      The net profit from ordinary activities attributable to shareholders for the year ended 31 December 2002 dealt
      with in the financial statements of the Company is approximately RMB259,696,000 (2001 : RMB128,565,000).

10.   DIVIDENDS

                                                                        Group                         Company

                                                                 2002             2001           2002            2001
                                                            RMB’000          RMB’000         RMB’000         RMB’000


      The Company
      Proposed final dividend
        — RMB0.190 per share (2001 : RMB0.101
        per share)                                            215,332           106,386       215,332         106,386
      Interim dividend — RMB0.139 per share
        (2001 : RMB0.118 per share)                           157,532           124,292       157,532         124,292


                                                              372,864           230,678       372,864         230,678


      A final dividend of RMB0.190 per ordinary share (2001 : RMB0.101 per ordinary share), amounting to
      approximately RMB215,332,000 (2001 : RMB106,386,000), has been proposed and will be submitted for formal
      approval at the forthcoming annual general meeting. As such, this dividend has not been recognised as a liability
      as at 31 December 2002.
60 Notes to Financial Statements
    31 December 2002




    10.   DIVIDENDS (Continued)

          The amount of the proposed final dividend for the year is calculated based on 1,133,324,723 shares (2001 :
          1,053,324,723 shares) in issue as at the date of approval of these financial statements. The proposed final
          dividend for the year is subject to the final approval of the Company’s shareholders at the forthcoming annual
          general meeting.

          During the year, the Group adopted the alternative disclosure requirement of proposed final dividend under IAS
          1 ‘‘Presentation of Financial Statements’’. To comply with this alternative disclosure requirement, a prior year
          reclassification has been made to present the proposed final dividend on the face of the balance sheets of the
          Company and of the Group and to disclose the proposed final dividend as an allocation of retained profits on a
          separate line within the capital and reserves section of the balance sheets. The result of this has been to
          reclassify the proposed final dividend of approximately RMB106,386,000 for the year ended 31 December 2001
          from the Group’s and the Company’s retained profits accounts to the proposed final dividend reserve accounts
          as at 31 December 2001. Such prior year reclassification had no net effect on the amount of the shareholders’
          equity of the Group and of the Company as at 31 December 2001.

          The effect of this alternative disclosure requirement under IAS 1 as at 31 December 2002 is that the current
          year’s proposed final dividend of approximately RMB215,332,000 has been included in the proposed final
          dividend reserve accounts within the capital and reserves section of the balance sheets of the Group and of the
          Company at that date, whereas in previous years only a disclosure of proposed final dividend would have been
          made in the notes to the financial statements.

    11.   EARNINGS PER SHARE

          Basic earnings per share is calculated based on the Group’s net profit attributable to shareholders of
          approximately RMB822,758,000 (2001 : approximately RMB614,842,000) divided by the weighted average
          number of 1,088,612,394 ordinary shares of HK$0.50 each (2001 : 1,029,653,490 ordinary shares of HK$0.50
          each) in issue during the financial year.

          Diluted earnings per share for the years ended 31 December 2002 and 2001 have not been calculated as no
          diluting events existed during these years.

    12.   INVESTMENTS IN SUBSIDIARIES

                                                                                                      Company

                                                                                                     2002            2001
                                                                                                RMB’000         RMB’000


          Unlisted shares, at cost                                                               497,043         497,043
          Due from subsidiaries                                                                  665,823         229,421


                                                                                               1,162,866         726,464
                                                                  Notes to Financial Statements 61
                                                                                                      31 December 2002




12.   INVESTMENTS IN SUBSIDIARIES (Continued)

      The amounts due from subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

      Particulars of the subsidiaries as at the balance sheet date are set out below:

                                 Place of                     Paid-up       Percentage of
                                 incorporation/                 share/    equity attributable
                                 establishment              registered     to the Company
      Name                       and operations                capital      Direct      Indirect   Principal activities


      Loampit*                   British Virgin               US$200          100            —     Investment holding
                                   Islands


      Champ Base Limited*        Hong Kong                    HK$100            —           100    Investment holding


      Linyi Xincheng*            PRC                   US$11,300,000            —           100    Manufacturing and
        (Note (a))                                                                                   sale of meat
                                                                                                     products


      Linyi Minsheng*            PRC                    US$7,000,000            —           100    Manufacturing and
        (Note (b))                                                                                   sale of meat
                                                                                                     products


      Xiangtan Jinluo*           PRC                    US$1,800,000            —           100    Manufacturing and
        (Note (c))                                                                                   sale of meat
                                                                                                     products


      Tongliao Jinluo*           PRC                    US$2,200,000            —           100    Manufacturing and
        (Note (d))                                                                                   sale of meat
                                                                                                     products


      Daqing Jinluo*             PRC                    US$9,000,000            —           100    Manufacturing and
        (Note (e))                                                                                   sale of meat
                                                                                                     products


      Meishan Jinluo*            PRC                  RMB55,320,000             —           100    Manufacturing and
        (Note (f))                                                                                   sale of meat
                                                                                                     products


      * Audited by Ernst & Young affiliated firms for statutory or consolidation purposes
62 Notes to Financial Statements
    31 December 2002




    12.    INVESTMENTS IN SUBSIDIARIES (Continued)

           Notes:


           (a)       Linyi Xincheng is a WOFE established by the Group for an operating period of 26 years commencing from the date of issuance of its
                     business licence on 21 October 1994, which may be extended upon approval of the relevant PRC authorities according to PRC laws.


           (b)       Linyi Minsheng is a WOFE established by the Group for an operating period of 20 years commencing from the date of issuance of its
                     business licence on 10 May 2001, which may be extended upon approval of the relevant PRC authorities according to PRC laws.


           (c)       Xiangtan Jinluo is a WOFE established by the Group for an operating period of 20 years commencing from the date of issuance of its
                     business licence on 20 September 2001, which may be extended upon approval of the relevant PRC authorities according to PRC laws.


           (d)       Tongliao Jinluo is a WOFE established by the Group for an operating period of 20 years and 2 months commencing from the date of
                     issuance of its business licence on 4 February 2002, which may be extended upon approval of the relevant PRC authorities according to
                     PRC laws.


           (e)       Daqing Jinluo is a WOFE established by the Group for an operating period of 20 years commencing from the date of the issuance of its
                     business licence on 19 March 2002, which may be extended upon approval of the relevant PRC authorities according to PRC laws.


           (f)       Meishan Jinluo is a WOFE established by the Group for an operating period of 20 years commencing from the date of issuance of its
                     business licence on 11 April 2002, which may be extended upon approval of the relevant PRC authorities according to PRC laws.


    13.    FIXED ASSETS

           Group

                                                                                             Furniture, fixtures
                                 Leasehold             Leasehold           Plant and             and office
                             land and buildings      improvements          machinery            equipment          Motor vehicles            Total
                                2002        2001    2002         2001    2002        2001    2002          2001    2002        2001      2002        2001
                             RMB’000     RMB’000 RMB’000      RMB’000 RMB’000     RMB’000 RMB’000       RMB’000 RMB’000     RMB’000   RMB’000     RMB’000

    Cost:
      At 1 January              90,417    48,551   258,692    242,898   504,918    307,327      8,061      5,152   12,130     9,804     874,218      613,732
      Additions                214,509    41,866    41,903     15,794   238,082    197,591      3,916      2,909    1,780     2,326     500,190      260,486

       At 31 December          304,926    90,417   300,595    258,692   743,000    504,918     11,977      8,061   13,910    12,130   1,374,408      874,218

    Accumulated
       depreciation:
       At 1 January              9,833     7,573   105,196     73,636   129,717     87,173      3,084      1,945    8,550     6,322     256,380      176,649
       Provided during the
          year                   6,694     2,260     28,466    31,560    58,378     42,544      2,069      1,139    1,577     2,228      97,184       79,731

       At 31 December           16,527     9,833   133,662    105,196   188,095    129,717      5,153      3,084   10,127     8,550     353,564      256,380

    Net book value             288,399    80,584   166,933    153,496   554,905    375,201      6,824      4,977    3,783     3,580   1,020,844      617,838

           The Group’s leasehold land and buildings are situated in the PRC and are held under medium term leases.

           As at 31 December 2002, the Group is in the process of obtaining the land use rights certificates together with
           the related building ownership certificates for certain of its leasehold land and buildings situated in Daqing,
           Heilongjiang Province, the PRC amounting to approximately RMB90 million at net book value (2001 : Nil). These
           leasehold land and buildings were acquired by the Group during the year. As confirmed by the Group’s legal
           advisors, the Group has obtained the right to use the land and its improvements legally by way of such
           acquisition. Once the Group has obtained all relevant certificates, the Group has the right to assign, lease or
           mortgage the land and its improvements. Subsequent to the balance sheet date, relevant certificates for
           leasehold land and buildings amounting to approximately RMB28 million were obtained.
                                                                   Notes to Financial Statements 63
                                                                                                     31 December 2002




14.   DEPOSITS

      The amount represented the Group’s deposits paid for the acquisition of fixed assets as at 31 December 2002
      (2001 : Nil). Up to the date of these financial statements, approximately RMB54 million of the deposits have been
      transferred to the Group’s fixed assets under the categories of plant and machinery and construction in progress
      upon delivery of machinery and commencement of the construction subsequent to the balance sheet date.

15.   INVENTORIES

                                                                                                    Group
                                                                                                2002            2001
                                                                                             RMB’000         RMB’000


      Raw materials                                                                            50,850          51,519
      Finished goods                                                                          384,998         322,218


                                                                                              435,848         373,737

      No significant amounts of inventories included in the above amount were carried at net realisable value as at 31
      December 2002 (2001 : Nil).

16.   TRADE DEBTORS

                                                                                                    Group

                                                                                                 2002            2001
                                                                                             RMB’000         RMB’000


      Trade debtors                                                                           505,617         442,767
      Less: Provision for doubtful debts                                                       (25,400)        (22,000)


                                                                                              480,217         420,767


      The movements in the provision for doubtful debts were as follows:

                                                                                                    Group

                                                                                                 2002            2001
                                                                                             RMB’000         RMB’000


      At 1 January                                                                             22,000           18,000
      Provision during the year                                                                  3,400           4,000


      At 31 December                                                                           25,400           22,000
64 Notes to Financial Statements
    31 December 2002




    16.   TRADE DEBTORS (Continued)

          The Group normally allows credit terms to its trade customers ranging from 30 to 60 days (2001 : 30 to 60 days).

          An aged analysis of the Group’s trade debtors is as follows:

                                                                                                       Group

                                                                                                     2002            2001
                                                                                                RMB’000         RMB’000


          Current–30 days                                                                        274,126         296,093
          31–60 days                                                                             136,655           89,101
          61–90 days                                                                               59,664          30,242
          Over 90 days                                                                             35,172          27,331


                                                                                                 505,617         442,767


    17.   CASH AND BANK BALANCES

          As at 31 December 2002, the Group had cash and bank balances mainly deposited in the banks in the PRC
          denominated in RMB amounted to approximately RMB267,247,000 (2001 : approximately RMB169,584,000).
          RMB is not freely convertible into foreign currencies. Under the PRC’s Foreign Exchange Control Regulations
          and Administration of Settlement and Sales and Payment of Foreign Exchange Regulations, the Group is
          permitted to exchange RMB for foreign currencies through banks that are authorised to conduct foreign
          exchange business.

    18.   TRADE CREDITORS

          An aged analysis of the Group’s trade creditors is as follows:

                                                                                                       Group

                                                                                                     2002            2001
                                                                                                RMB’000         RMB’000


          Current–30 days                                                                          34,905          33,743
          31–60 days                                                                               24,168          21,082
          61–90 days                                                                               14,097           9,846
          Over 90 days                                                                              3,569           1,527


                                                                                                   76,739          66,198
                                                              Notes to Financial Statements 65
                                                                                              31 December 2002




19.   ACCRUALS AND OTHER CREDITORS

                                                               Group                        Company

                                                             2002           2001           2002           2001
                                                        RMB’000         RMB’000        RMB’000        RMB’000


      Accruals                                             53,555         46,178             —              —
      Other creditors                                      68,507         21,587          2,294             67


                                                          122,062         67,765          2,294             67


20.   INTEREST-BEARING BANK LOANS

      The Group’s bank loans are unsecured, bear interest ranging from 5% to 8% (2001 : 6% to 9%) per annum and
      are repayable within one year.

21.   SHARE CAPITAL

      Shares

                                                                                           2002           2001
                                                                                       RMB’000        RMB’000


      Authorised:
        4,000,000,000 (2001 : 4,000,000,000)
        ordinary shares of HK$0.50 each                                               2,140,000      2,140,000


      Issued and fully paid:
        1,133,324,723 (2001 : 1,053,324,723)
        ordinary shares of HK$0.50 each                                                 603,343        560,943
66 Notes to Financial Statements
    31 December 2002




    21.   SHARE CAPITAL (Continued)

          Shares (Continued)

          The following changes in the Company’s authorised and issued share capital have taken place:

                                                                    Number of           Number of
                                                               ordinary shares     ordinary shares       Par value
                                                      Notes         of HK$0.10     of HK$0.50 each       RMB’000


          Authorised:
            Balance at 1 January 2001                                 1,000,000                  —            107

            Creation of additional authorised share
              capital                                  (a)       19,999,000,000                  —       2,139,893


            Consolidation of every five ordinary
              shares into one ordinary share           (b)      (20,000,000,000)     4,000,000,000              —


            Balance at 31 December 2001,
              1 January 2002 and 31 December
              2002                                                           —       4,000,000,000       2,140,000


          Issued:
             Balance at 1 January 2001                                1,000,000                  —              —

            Share consolidation                        (b)          (1,000,000)            200,000              —


            Issue and allotment of ordinary shares      (c)                  —         933,124,723        496,937

            Credited as fully paid the1,000,000
              shares of HK$0.10 each that were
              issued nil-paid on 4 October 2000         (c)                  —                   —            106

            New shares issued for public
              subscription                             (d)                   —         120,000,000         63,900


            Balance at 31 December 2001 and
              1 January 2002                                                 —       1,053,324,723        560,943

            Placing of shares to the public            (e)                   —          80,000,000         42,400


            Balance at 31 December 2002                                      —       1,133,324,723        603,343
                                                                                     Notes to Financial Statements 67
                                                                                                                                 31 December 2002




21.   SHARE CAPITAL (Continued)

      Shares (Continued)

      Notes:


      (a)      On 6 February 2001, the authorised share capital of the Company was increased from HK$100,000 to HK$2,000,000,000 by the creation
               of an additional 19,999,000,000 shares of HK$0.10 each.


      (b)      On 6 February 2001, every five ordinary shares of HK$0.10 each in the authorised and issued share capital of the Company were
               consolidated into one ordinary share of HK$0.50 each.


      (c)      On 6 February 2001, pursuant to the Restructuring Exercise, an aggregate of 933,124,723 ordinary shares of HK$0.50 each in the
               Company were issued and credited as fully paid; and the 200,000 ordinary shares of HK$0.50 each then outstanding in the Company
               were credited as fully paid, in consideration of and in exchange for the acquisition by the Company of the entire issued share capital of
               Loampit.


      (d)      On 14 March 2001, 120,000,000 new shares of HK$0.50 each were issued to the public (the ‘‘Public Offer’’) at S$0.45 each for a total
               cash consideration, before issue expenses, of S$54,000,000 (approximately RMB254,934,000). The net proceeds from the Public Offer
               were intended to be used for acquisition of fixed assets and expansion of the Group’ distribution network.


      (e)      On 17 July 2002, 80,000,000 shares of HK$0.50 each were issued by way of placement of shares (the ‘‘Placement’’) at S$1.22 each for a
               total cash consideration, before issue expenses, of S$97,600,000 (approximately RMB457,451,000). The net proceeds from the
               Placement were intended to be used for increasing the Group’s production capacity and working capital and for the Group’s advertising
               and marketing.
68 Notes to Financial Statements
    31 December 2002




    22.   RESERVES

          Group

                                                                   Share
                                                                 premium     Statutory    Retained
                                                                 account     reserves       profits        Total
                                                                 RMB’000     RMB’000      RMB’000      RMB’000
                                                                             (note (a))


          Balance at 1 January 2001                                    —       47,045      272,935      319,980
          New shares issued for public subscription               191,034           —            —      191,034
          Share issue expenses (note (b))                         (29,119)          —            —       (29,119)
          Transfer to statutory reserves                               —       34,000       (34,000)          —
          Net profit for the year                                      —            —      614,842      614,842
          Interim dividend — note 10                                   —            —      (124,292)    (124,292)


          Balance at 31 December 2001 and 1 January 2002
            (as previously reported)                             161,915       81,045      729,485      972,445
          Prior year reclassification: Proposed final dividend
            — note 10                                                  —            —      (106,386)    (106,386)


          Balance at 31 December 2001 and 1 January 2002
            (as reclassified)                                     161,915      81,045      623,099      866,059
          Placement of shares                                     415,051           —            —      415,051
          Share issue expenses (note (b))                         (19,737)          —            —       (19,737)
          Net profit for the year                                      —            —      822,758      822,758
          Transfer to statutory reserves                               —         4,000       (4,000)          —
          Interim dividend — note 10                                   —            —      (157,532)    (157,532)
          Proposed final dividend — note 10                            —            —      (215,332)    (215,332)


          Balance at 31 December 2002                             557,229      85,045     1,068,993    1,711,267
                                                                                       Notes to Financial Statements 69
                                                                                                                                    31 December 2002




22.   RESERVES (Continued)

      Company

                                                                                                                    Retained
                                                                                                   Share              profits/
                                                                                                premium         (accumulated
                                                                                                 account              losses)                   Total
                                                                                                RMB’000              RMB’000                  RMB’000


      Balance at 1 January 2001                                                                        —                      —                      —
      Net profit for the year                                                                          —                 128,565                128,565
      New shares issued for public subscription                                                   191,034                     —                 191,034
      Share issue expenses (note (b))                                                             (29,119)                    —                 (29,119)
      Interim dividend — note 10                                                                       —                (124,292)              (124,292)


      Balance at 31 December 2001 and 1 January 2002
        (as previously reported)                                                                  161,915                   4,273               166,188
      Prior year reclassification:
        Proposed final dividend — note 10                                                                —              (106,386)              (106,386)


      Balance at 31 December 2001 and 1 January 2002
         (as reclassified)                                                                       161,915                (102,113)                59,802
      Placement of shares                                                                        415,051                      —                 415,051
      Share issue expenses (note (b))                                                            (19,737)                     —                 (19,737)
      Net profit for the year                                                                         —                  259,696                259,696
      Interim dividend — note 10                                                                      —                 (157,532)              (157,532)
      Proposed final dividend — note 10                                                               —                 (215,332)              (215,332)


      Balance at 31 December 2002                                                                557,229                (215,281)               341,948

      Notes:

      (a)      In accordance with relevant PRC regulations, Linyi Xincheng, Linyi Minsheng, Xiangtan Jinluo, Tongliao Jinluo, Daqing Jinluo and
               Meishan Jinluo, being WOFEs established in the PRC, are required to appropriate not less than 10% of their profits after tax to the
               respective statutory reserves, until the respective balances of the fund reach 50% of the respective registered capitals. Subject to certain
               restrictions as set out in the relevant PRC regulations, their statutory reserves may be used to offset against their respective
               accumulated losses, if any.

      (b)      The share issue expenses of the Group and of the Company included professional service fees of approximately RMB0.2 million (2001 :
               RMB5.4 million) paid to auditors in connection with the issue of the Company’s shares to the public.


23.   SEGMENT INFORMATION

      The Group’s operating businesses are organised and managed separately according to the nature of products,
      with each segment representing a strategic business segment that offers different products in the PRC market.
      The fresh and frozen meat products segment carries out the business of pig slaughtering and the sale of fresh
      and frozen meat products. The processed meat products segment manufactures and distributes processed meat
      products, such as regular sausages and honey-baked ham.

      All of the Group’s revenue, expenses, results, assets and liabilities and capital expenditure are attributable to a
      single geographical region, which is the PRC.
70 Notes to Financial Statements
    31 December 2002




    23.   SEGMENT INFORMATION (Continued)

          For the financial year ended 31 December 2002

                                                               Fresh and   Processed
                                                             frozen meat        meat
                                                                products    products    Consolidated
                                                                RMB’000      RMB’000        RMB’000


          Segment revenue                                      3,169,323    1,887,440      5,056,763


          Segment net profit                                     595,117     457,906       1,053,023


          Unallocated corporate expenses                                                     (94,494)
          Interest income                                                                     11,147


          Profit from operating activities                                                   969,676
          Finance costs                                                                      (13,035)


          Profit before tax                                                                  956,641
          Tax                                                                               (133,883)


          Net profit from ordinary activities attributable
            to shareholders                                                                  822,758


          As at 31 December 2002

          Segment assets                                       1,193,925     820,694       2,014,619
          Unallocated corporate assets                                                       944,043


          Consolidated total assets                                                        2,958,662


          Segment liabilities                                     63,216      72,723         135,939
          Unallocated corporate liabilities                                                  292,781


          Consolidated total liabilities                                                     428,720


          Capital expenditure                                    320,450     179,740         500,190


          Depreciation                                            47,325      49,859          97,184


          Non-cash expenses                                        1,928       1,472           3,400
                                                            Notes to Financial Statements 71
                                                                                             31 December 2002




23.   SEGMENT INFORMATION (Continued)

      For the financial year ended 31 December 2001

                                                                Fresh and
                                                              frozen meat       Processed
                                                                  products   meat products      Consolidated
                                                                 RMB’000         RMB’000           RMB’000


      Segment revenue                                           2,718,396       1,518,484          4,236,880


      Segment net profit                                         439,084          379,890            818,974
      Unallocated corporate expenses                                                                 (58,535)
      Interest income                                                                                  8,138


      Profit from operating activities                                                               768,577
      Finance costs                                                                                  (14,459)


      Profit before tax                                                                              754,118
      Tax                                                                                           (139,276)


      Net profit from ordinary activities attributable to
        shareholders                                                                                 614,842


      As at 31 December 2001

      Segment assets                                             886,886          525,458          1,412,344
      Unallocated corporate assets                                                                   477,364


      Consolidated total assets                                                                    1,889,708


      Segment liabilities                                          46,338          19,860             66,198
      Unallocated corporate liabilities                                                              290,122


      Consolidated total liabilities                                                                 356,320


      Capital expenditure                                          76,919         183,567            260,486


      Depreciation                                                 38,471          41,260             79,731


      Non-cash expenses                                             2,567           1,433              4,000
72 Notes to Financial Statements
    31 December 2002




    24.   COMMITMENTS

          At the balance sheet date, the Group had the following outstanding commitments:

                                                                                                      2002            2001
                                                                                                  RMB’000         RMB’000


          (a)   Contracted capital commitments in respect of acquisition
                  of fixed assets                                                                   30,338          25,886


          (b)   Contracted investment commitment in a subsidiary established
                  in the PRC                                                                             —          15,444


          (c)   On 9 July 2002, the Group signed a non-binding letter of intent with a third party to acquire the production
                plant and machinery, the land use rights and properties (the ‘‘Heilongjiang Plant’’) situated in the
                Heilongjiang Province, the PRC. The capital commitment for the acquisition and related renovations of the
                Heilongjiang Plant not contracted for was estimated by the directors of the Company at approximately
                RMB236 million.


          (d)   Operating lease commitments:


                                                                                                      2002            2001
                                                                                                  RMB’000         RMB’000


                Total future minimum lease payments under non-cancellable operating
                  leases for land and buildings are as follows:
                    Not later than one year                                                          2,237          11,755
                    Later than one year but not later than five years                                  358            2,171


                                                                                                     2,595          13,926


                The Group leases certain of its land and buildings under operating lease arrangements. Leases for land
                and buildings are negotiated for the terms ranging from one to two years (2001 : one to four years).

    25.   FINANCIAL INSTRUMENTS

          At 31 December 2002, the Group’s financial instruments mainly consisted of cash and bank balances, trade
          debtors, other receivables, trade creditors, other creditors and bank loans.

          Financial risk management objectives and policies

          The Group is exposed to market risk, including primarily changes in interest rates and currency exchange rates.
                                                                     Notes to Financial Statements 73
                                                                                                        31 December 2002




25.   FINANCIAL INSTRUMENTS (Continued)

      Financial risk management objectives and policies (Continued)

      The Group does not have written risk management policies and guidelines. However, the board of directors
      meets periodically to analyse and formulate measures to manage the Group’s exposure to market risk, including
      principally changes in interest rates and currency exchange rates. Generally, the Group introduces conservative
      strategies on its risks management. As the Group’s exposure to the market risk is kept to a minimum, the Group
      has not used any derivatives and other instruments for hedging purposes. The Group does not hold or issue
      derivative financial instruments for trading purposes.

      (a)   Interest rate risk

            The interest rates and terms of repayment of the Group’s bank loans are disclosed in note 20.

      (b)   Credit risks

            The Group’s cash and cash equivalents are mainly deposited with PRC banks.

            The carrying amounts of trade debtors and other receivables included in the consolidated balance sheets
            represent the Group’s maximum exposure to credit risk in relation to its financial assets. No other financial
            assets carry a significant exposure to credit risk. The Group has no significant concentration of credit risk.

      (c)   Fair values

            The fair values of cash and bank balances, trade debtors, other receivables, trade creditors, other
            creditors and bank loans are not materially different from their carrying amounts because of the immediate
            or short term maturity of these financial instruments.

26.   RELATED PARTIES

      The Company’s ultimate holding company was owned by the directors of the Company as to 65% by Mr. Ming
      Kam Sing, 25% by Mr. Zhou Lian Kui and 10% by Mr. Zhou Lian Liang. The particulars of the Company’s
      ultimate holding company are set out in note 1 to the financial statements. Other than the foregoing and the
      subsidiaries of the Company, the particulars of which are set out in note 12 to the financial statements, there
      were no other principal related party relations where control over financial and operating policies of the subject
      entity existed as at the balance sheet date.
74 Notes to Financial Statements
    31 December 2002




    27.   POST BALANCE SHEET EVENTS

          Subsequent to 31 December 2002, the following events occurred:

          (a)   On 22 January 2003, Linyi Xincheng entered into a lease agreement with Shangqiu Fuguan Food
                Enterprise Group Company Limited, an independent third party to the Group, for a term of five years
                between 8 February 2003 to 7 February 2008. The lease includes meat slaughtering lines, cold storage
                facilities and equipment, all existing production equipment; staff premises and office buildings located at
                Shangqiu City, the Henan Province, the PRC. The annual rental payment was estimated by the Company’s
                directors at approximately RMB5,800,000.

          (b)   On 23 January 2003, Linyi Xincheng entered into a co-operative agreement with the XingLong Forestry
                Bureau of the Heilongjiang Province (the ‘‘Heilongjiang Bureau’’). Pursuant to the terms of the agreement,
                the Heilongjiang Bureau will inject an amount of RMB45,000,000 to build a meat production plant at Xin
                Long Town, BaYan County, the Heilongjiang Province, the PRC and will install related facilities. Linyi
                Xincheng will invest no less than an amount of RMB11,000,000 on related equipment and will install these
                equipment within a period of two months after the completion of the building of the production plant by the
                Heilongjiang Bureau (the ‘‘Completion Date’’).

                After the Completion Date, Linyi Xincheng will rent the meat production plant from the Heilongjiang Bureau
                for an initial term of 20 years commencing from the Completion Date, at a fixed annual rent payment of
                RMB4,180,000. Linyi Xincheng will have the sole rights of operation and the Heilongjiang Bureau does not
                have any interest in the business operated by Linyi Xincheng and profits arising therefrom.

          (c)   Pursuant to a board resolution passed on 18 March 2003, a final dividend of RMB0.190 per ordinary share,
                amounting to approximately RMB215,332,000, was proposed by the Company and will be submitted for
                formal approval at the forthcoming annual general meeting.

    28.   COMPARATIVE AMOUNTS

          As further explained in note 10 to the financial statements, due to the adoption of alternative disclosure
          requirements of proposed final dividend under IAS 1, certain comparative amounts have been reclassified to
          conform with the current year’s presentation.

    29.   APPROVAL OF THE FINANCIAL STATEMENTS

          The financial statements were approved and authorised for issue by the board of directors on 18 March 2003.
                                                                                              Statistics of Shareholdings 75
                                                                                                                                as at 14 March 2003




SHAREHOLDERS’ INFORMATION AS AT 14 MARCH 2003

Authorised share capital                     :    HK$2,000,000,000.00
Issued and fully paid-up capital             :    HK$566,662,361.50
Class of shares                              :    Ordinary share of HK$0.50 each
Voting rights                                :    One vote per share


DISTRIBUTION OF SHAREHOLDINGS

                                                                                           No. of                                No. of
Size of Shareholdings                                                            Shareholders                   %               Shares                %


1 – 999                                                                                           2          0.10                    700           0.00
1,000 – 10,000                                                                               1,562          73.47            8,649,000             0.76
10,001 – 1,000,000                                                                             543          25.54          30,941,000              2.73
1,000,001 and above                                                                              19          0.89      1,093,734,023             96.51


Total                                                                                        2,126        100.00       1,133,324,723            100.00


SUBSTANTIAL SHAREHOLDERS
(as defined under the Singapore Companies Act)

as recorded in the Register of Substantial Shareholders as at 14 March 2003

                                                                                            Direct                            Deemed
                                                                                         Interest               %              Interest               %


Ming Kam Sing                                                                        113,648,889            10.03        592,327,306             52.26
Zhou Lian Kui                                                                         10,666,624             0.94        592,327,306             52.26
Maleque Limited                                                                      592,327,306            52.26                      —              —

Notes:


(i)      Ming Kam Sing and Zhou Lian Kui are deemed to be interested in the shareholding of Maleque Limited under the Singapore Companies Act by
         virtue of their interests of 65% and 25% respectively in Maleque Limited.


(ii)     Under the Singapore Companies Act, a person has a substantial shareholding in a company of he is, directly or indirectly, interested in not less
         than 5% of the aggregate of the nominal amount of all the voting shares in the Company.
76 Statistics of Shareholdings
    as at 14 March 2003




    TWENTY LARGEST SHAREHOLDERS

          Name                                                                            No. of Shares          %


    1.    Maleque Limited                                                                   553,327,306      48.82
    2.    Raffles Nominees Pte Ltd                                                          152,494,900      13.46
    3.    DBS Nominees Pte Ltd                                                               71,474,700       6.31
    4.    HKSCC Nominees Limited                                                             68,625,000       6.06
    5.    Ming Kam Sing                                                                      57,648,889       5.09
    6.    Morgan Stanley Asia (Singapore) Securities Pte Ltd                                 48,525,411       4.28
    7.    Citibank Nominees Singapore Pte Ltd                                                28,632,089       2.53
    8.    HSBC (Singapore) Nominees Pte Ltd                                                  25,706,500       2.27
    9.    United Overseas Bank Nominees Pte Ltd                                              20,795,000       1.83
    10.   DB Nominees (S) Pte Ltd                                                            13,568,000       1.20
    11.   Zhou Lian Kui                                                                      10,666,624       0.94
    12.   UOB Kay Hian Pte Ltd                                                               10,178,000       0.90
    13.   HSBC Nominees (Hong Kong) Limited                                                   7,707,000       0.68
    14.   G K Goh Stockbrokers Pte Ltd                                                        6,778,900       0.60
    15.   Seapac Investment Pte Ltd                                                           5,450,000       0.48
    16.   DBS Vickers Securities (Singapore) Pte Ltd                                          5,278,000       0.47
    17.   Kim Eng Ong Asia Securities Pte Ltd                                                 4,254,000       0.38
    18.   Philip Securities Pte Ltd                                                           1,482,704       0.13
    19.   OCBC Securities Private Ltd                                                         1,141,000       0.10
    20.   Daiwa Securities SMBC Singapore Pte Ltd                                             1,000,000       0.09


          Total                                                                           1,094,734,023      96.62


    PERCENTAGE OF SHAREHOLDING IN PUBLIC HANDS

    36.77% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with Rule
    723 of the Listing Manual of the SGX-ST.
                                                               Notice of Annual General Meeting 77




NOTICE IS HEREBY GIVEN that the Annual General Meeting of People’s Food Holdings Limited (‘‘the Company’’) will
be held at The Fullerton Hotel, EDB Room, 1 Fullerton Square, Singapore 049178 on Friday, 9 May 2003 at 10 : 00am
for the following purposes:

                                              AS ORDINARY BUSINESS

1.    To receive and adopt the Directors’ Report and the Audited Accounts of the Company and its subsidiaries for the
      financial year ended 31 December 2002.                                                              (Resolution 1)

2.    To declare a final dividend of RMB0.190 per ordinary share tax not applicable for the year ended 31 December
      2002. (previous year: RMB0.101 per share)                                                           (Resolution 2)

3.    To re-elect the following Directors pursuant to Bye-laws 85(2) and 86 of the Company’s Bye-laws.

      Dr Ow Chin Hock         (Retiring under Bye-law 85(2))                                              (Resolution 3)
      Mr Chng Hee Kok         (Retiring under Bye-law 86)                                                 (Resolution 4)
      Mr Chan Kin Sang        (Retiring under Bye-law 86)                                                 (Resolution 5)


      The above Directors will, upon re-election as Directors of the Company, remain as members of the Audit
      Committee and will be considered independent for the purposes of Rule 704(8) of Listing Manual of the
      Singapore Exchange Securities Trading Limited.

4.    To approve Directors’ fees of RMB419,000 for the year ended 31 December 2002. (previous year: RMB395,000)
                                                                                                          (Resolution 6)

5.    To re-appoint Ernst & Young as the Company’s Auditors and to authorise the Directors to fix their
      remuneration.                                                                                       (Resolution 7)

6.    To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

                                               AS SPECIAL BUSINESS

To consider, and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without modifications:

7.    Authority to allot and issue shares up to fifty per cent (50%) of issued share capital

      ‘‘That pursuant to the provisions of the Companies Act 1981 of Bermuda and Rule 806(2) of the Singapore
      Exchange Securities Trading Limited, the Directors be empowered to allot and issue shares and convertible
      securities in the capital of the Company at any time and upon such terms and conditions and for such purposes
      as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares and
      convertible securities to be allotted and issued pursuant to this Resolution shall not exceed fifty per centum
      (50%) of the issued capital of the Company at the time of the passing of this Resolution of which the aggregate
      number of shares otherwise than pursuant to (i) a Rights Issue; (ii) the exercise of warrants, if any, to subscribe
      for Shares or the exercise of options granted under any share option scheme adopted by the Company; (iii) an
78 Notice of Annual General Meeting




         issue of Shares in lieu of the whole or part of a dividend on Shares in accordance with the Company’s Bye-laws;
         or (iv) an issue of Shares made pro rata to holders of Shares on a fixed record date, shall not exceed twenty per
         centum (20%) of the issued capital of the Company and that such authority shall, unless revoked or varied by the
         Company in general meeting, continue in force until the conclusion of the Company’s next Annual General
         Meeting or the date by which the next Annual General Meeting is required by law or the bye-laws of the
         Company to be held, whichever is earlier.

         ‘‘Rights Issue’’ means an offer of Shares open for a period fixed by the Directors to the holders of Shares on the
         register of members of the Company on a fixed record date in proportion to their then holdings of such Shares
         (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation
         to fractional entitlements or having regard to any restriction or obligation under the laws of, or the requirements
         of any recognized regulatory body or any stock exchange in, any territory outside Hong Kong). See Explanatory
         Note (i)                                                                                           (Resolution 8)

    8.   General unconditional mandate to be granted to the Directors to repurchase ordinary shares of the
         Company

         THAT:

         (a)   the Directors be granted a mandate to exercise all the powers of the Company to purchase shares in the
               capital of the Company (‘‘Shares’’) of up to 10% of the aggregate nominal value of the share capital of the
               Company in issue as at the date of the passing of this resolution, on the Hong Kong Stock Exchange,
               Singapore Stock Exchange and on any other stock exchange on which the Shares may be listed and which
               is recognized by The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission
               of Hong Kong for this purpose during the Approved Period (as hereinafter defined) pursuant to and in
               accordance with the Companies Act 1981 of Bermuda, the Listing Manual of the Singapore Exchange
               Securities Trading Limited and the Rules Governing the Listing of Securities on The Stock Exchange of
               Hong Kong Limited (as amended from time to time) and the ‘‘Guidelines on Share Repurchases by the
               Company’’ set out in Appendix I of the circular attached to this annual report;

               ‘‘Approved Period’’ means the period from the passing of this resolution until whichever is the earlier of:

               (i)    the conclusion of the next annual general meeting of the Company following the passing of this
                      resolution; or

               (ii)   the expiration of the period within which the next annual general meeting of the Company is required
                      by law or the bye-laws of the Company to be held; or
                                                                Notice of Annual General Meeting 79




             (iii)   the passing of an ordinary resolution by shareholders of the Company in general meeting revoking or
                     varying the authority given to the Directors by this resolution.

             See Explanatory Notes (ii)                                                                 (Resolution 9)

                                                                                                 By Order of the Board
                                                                                                    Pang Wai Hong
                                                                                                     Yvonne Choo
                                                                                                       Secretaries


Hong Kong, 10 April 2003

Explanatory Notes:

(i)    The Ordinary Resolution 8, in item 7, if passed, will empower the Directors from the date of the above Meeting
       until the date of the next Annual General Meeting or the date by which the next Annual General Meeting is
       required by law or the bye-laws of the Company to be held or variation or revocation by the Company in general
       meeting, whichever first occurs to allot and issue shares and convertible securities in the Company. The number
       of shares and convertible securities that the Directors may allot and issue under this Resolution would not
       exceed fifty per centum (50%) of the issued capital of the Company at the time of the passing of this resolution.
       For issue of shares and convertible securities other than on a pro rata basis to all shareholders, the aggregate
       number of shares and convertible securities to be issued shall not exceed twenty per centum (20%) of the issued
       capital of the Company.

       The percentage of issued capital is based on the Company’s issued capital after adjusting for (a) new shares
       arising from the conversion of convertible securities or employee share options on issue at the time this
       proposed Ordinary Resolution is passed and (b) any subsequent consolidation or subdivision of shares.

(ii)   The Ordinary Resolution 9 proposed in item 8 above, if passed, will enable the Directors to exercise all the
       powers for and on behalf of the Company to purchase on the stock exchange in Hong Kong, the stock exchange
       in Singapore or on any stock exchange on which the shares of the Company (‘‘Shares’’) are listed and which is
       recognized by the Securities and Futures Commission in Hong Kong and HKSE for this purpose, and which are
       in accordance with the SGX-ST Listing Rules and HKSE Listing Rules and all applicable laws and regulations,
       Shares not exceeding 10% of the total nominal amount of the Shares in issue as at the date of the passing of the
       above resolution, with such mandate to expire at the end of the Company’s next annual general meeting, or at
       the end of the period within which the Company is required by law or its Bye-Laws to hold its next annual general
       meeting, or when varied or revoked by an ordinary resolution of the Shareholders in general meeting , whichever
       occurs first.
80 Notice of Annual General Meeting




    Notes (For the Singapore shareholders):

    1.   If a shareholder being a Depositor whose name appears in the Depository Register (as defined in Section 130A
         of the Companies Act, Cap. 50 of Singapore) wishes to attend and vote at the Annual General Meeting (the
         ‘‘Meeting’’), then he/she/it should complete the Proxy Form and deposit the duly completed Proxy Form at the
         office of the Company’s Singapore Share Transfer Agent, Lim Associates (Pte) Ltd at 10 Collyer Quay #19-08
         Ocean Building, Singapore 049315, at least 48 hours before the time of the meeting.

    2.   If a depositor wishes to appoint a proxy/proxies, then the Proxy Form must be deposited at the office of the
         Company’s Singapore Share Transfer Agent, Lim Associates (Pte) Ltd at 10 Collyer Quay #19-08 Ocean
         Building, Singapore 049315, at least 48 hours before the time of the meeting.

    3.   In order to ascertain voting entitlements, the register of members will be closed from Wednesday, 7 May 2003 to
         Friday, 9 May 2003 (both days inclusive) during which period no transfer of shares will be effected. All transfers
         accompanied by the relevant share certificates must be lodged with the Company’s Singapore Share Transfer
         Agent, Lim Associates (Pte) Ltd at 10 Collyer Quay #19-08 Ocean Building, Singapore 049315 not later than
         5 : 00 p.m. on Tuesday, 6 May 2003.

    4.   In order to ascertain dividend entitlements, the register of members will be closed on Monday, 26 May 2003. All
         transfers accompanied by the relevant share certificates must be lodged with the Company’s Singapore Share
         Transfer Agent, Lim Associates (Pte) Ltd at 10 Collyer Quay #19-08 Ocean Building, Singapore 049315 not later
         than 5 : 00 p.m. on Friday, 23 May 2003.

    Notes (For the Hong Kong shareholders):

    1.   Subject to the Company’s Bye-laws, a member entitled to attend and vote at the meeting convened by the above
         notice who is the holder of two or more shares is entitled to appoint not more than two proxies to attend and vote
         in his stead. A proxy need not be a member of the Company.

    2.   To be valid, the form of proxy together with a power of attorney or other authority, if any, under which it is signed
         or a certified copy of such power or authority must be deposited at the offices of the Company’s Hong Kong
         Branch Share Registrar, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester
         Road, Wanchai, Hong Kong not later than 48 hours before the time of the meeting or any adjourned meeting.

    3.   In order to ascertain voting entitlements, the register of members will be closed from Wednesday, 7 May 2003 to
         Friday, 9 May 2003 (both days inclusive) during which period no transfer of shares will be effected. All transfers
         accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong Branch Share
         Registrar, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road,
         Wanchai, Hong Kong not later than 4 : 30 p.m. on Tuesday, 6 May 2003.

    4.   In order to ascertain dividend entitlements, the register of members will be closed on Monday, 26 May 2003. All
         transfers accompanied by the relevant share certificates must be lodged with the Company’s Hong Kong Branch
         Share Registrar, Tengis Limited at Ground Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road,
         Wanchai, Hong Kong not later than 4 : 30 p.m. on Friday, 23 May 2003.

				
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